Impact of globalization on North Carolina's furniture industries

THE IMPACT OF GLOBALIZATION ON NORTH
CAROLINA'S FURNITURE INDUSTRIES
BY
Ucheoma Nwagbara
Policy Analyst
North Carolina Department of Commerce
Policy, Research, and Strategic Planning Division
Urs Buehlmann
Assistant Professor and Extension Specialist
North Carolina State University
Department of Wood and Paper Science
Wood Products Extension
Al Schuler
Research Economist
USDA Forest Service
Northeastern Research Station
December 2002
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TABLE OF CONTENTS
EXECUTIVE SUMMARY............................................................................................. 4
I. INTRODUCTION ....................................................................................................... 7
Globalization ............................................................................................................... 8
Purpose of the Study ................................................................................................... 9
Scope of the Study..................................................................................................... 10
Sources of Data ......................................................................................................... 11
II. NORTH CAROLINA FURNITURE INDUSTRY TODAY ................................... 12
III. IMPACT OF GLOBALIZATION .......................................................................... 17
North Carolina Furniture Employment Trends 1980-1990 and 1991-2000.............. 18
North Carolina Furniture Plant Closings Trends 1980-1990 and 1991-2000 ........... 20
North Carolina Economic Development Partnerships .............................................. 24
*Suppressed data ....................................................................................................... 24
IV. CONCLUSIONS..................................................................................................... 28
V. POLICY ISSUES ..................................................................................................... 29
Skill Improvement..................................................................................................... 31
Economic Policy ....................................................................................................... 33
Trade Policy .............................................................................................................. 36
VI: FURNITURE INDUSTRY RESOURCES............................................................. 38
Organization .................................................................................................................. 38
Address......................................................................................................................... 38
Contact .......................................................................................................................... 38
References ..................................................................................................................... 41
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TABLE OF FIGURES
Figure 1: North Carolina Furniture Industry Gross State Product ($m), 1990-
2000........................................................................................................ 12
Figure 2: North Carolina Furniture Industry Average Annual Wages, 1980-
2000........................................................................................................ 13
Figure 3: Furniture Plant Closings & Layoffs 2001-2002 (50 or more Job
Losses).................................................................................................... 16
Figure 4: U.S. Furniture Imports and Exports ($000s) Selected Countries,
1999-2001............................................................................................... 18
Figure 5: Jobs in North Carolina Furniture Industry 1980-1990 ........................... 19
Figure 6: Employment Trends in North Carolina Furniture Industry 1980-
1990........................................................................................................ 20
Figure 7: Jobs in North Carolina Furniture Industry 1991-2000 ........................... 21
Figure 8: Employment Trends in North Carolina Furniture Industry 1991-
2000........................................................................................................ 22
Figure 9: Summary of Employment Trends in North Carolina Furniture
Industry 1980-2001 ................................................................................ 23
Figure 10: Furniture Jobs in NC Economic Development Partnerships 1990-
2000........................................................................................................ 24
Figure 11: Furniture Establishments in North Carolina’s Economic
Development Partnerships 1990-2000 ................................................... 25
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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EXECUTIVE SUMMARY
Globalization has encouraged the relaxation if not abolishment of import control rules.
In the process it gave fillip to increased penetration of cheap imports, especially from
Asia and Latin America, at the disadvantage of the domestic (furniture) industry. The
industry lost market share in spite of a strong housing market over the last years.1 This
process shows no signs of stopping and the industry continues to lose market share
relative to imports. This is attributable largely to globalization friendly nuances
including the North American Free Trade Agreement – NAFTA, Free Trade Area of
the Americas – FTAA, and the World Trade Organization - WTO, which favors wider
market access. According to Buehlmann and Schuler, imports now equal 53 percent of
domestic U.S. furniture production and account for 33 percent of U.S. consumption2,
thereby flattening domestic furniture production, further eroding jobs.
The numbers forcefully tell the story. Between 2000 and 2001, for example, the U.S.
furniture industry lost more than 36,000 jobs (6.5 percent of nationwide employment)
according to the U.S. Bureau of Labor Statistics.3 According to the North Carolina
Employment Security Commission (ESC), in 2000 (the most recent annual data
available), the North Carolina furniture industry employed 1,015 (1.3 percent) less
people than it did a year prior. In the third quarter of 2001 (most recent quarter
available), furniture employment dipped more than 10 percent compared to the same
period a year earlier, a record of 7,852 job losses.4 Between 1990 and 2000, the
furniture employment level dropped sharply from 85,178 to 76,220, shedding almost
9,000 jobs or more than 10 percent of industry’s employment.5 This trend accelerated
significantly in 2001, when almost 10,000 jobs were lost in one year (a loss of 12.8
percent of the total workforce employed in the North Carolina furniture industry in
2000).6 At the same time, new investments, capitalization, and modernization are in
dire straits; while industry analysts forecast continuing anxiety in the furniture sector.
Specific findings of this study include:
• From 1980 to 1990, the North Carolina furniture industry averaged 84,578 jobs
per year compared to 77,666 average jobs in the period from 1991 to 2000, a
difference of more than 6,900 jobs or 8.2 percent.
• From 1980 to 1990, the North Carolina furniture industry recorded a 3,163 net
job gain compared to a 2,664 net job loss in the period from 1991 to 2000,
indicating more than a 84 percent net job loss.
• From 1980 to 1990, the North Carolina average annual percent of furniture jobs
to total manufacturing employment was 10.2 percent compared to 9.3 percent in
the period from 1991 to 2000, declining almost 1 percent.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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• In the period from 1980 to 1990, North Carolina's total furniture employment
establishment net gain was 192 or 30.3 percent, compared to 47 establishments
closings (-5.5 percent) in the period from 1991-2000.
• Consistent with statewide trends, all of North Carolina’s seven Economic
Development Regions (data for North Carolina’s Eastern region was suppressed
for confidentiality reasons) lost furniture jobs in the period from 1991 to 2000.
The hardest hit Region was the Piedmont Triad which lost more than 3,700 jobs
or 12.5 percent, AdvantageWest lost 1,731 jobs or 8.1 percent and, the
Charlotte Region where 1,591 jobs or 6.4 percent were lost. The Research
Triangle Partnership shed 1,006 jobs or 33.5 percent, North Carolina’s
Southeast lost 816 jobs or 56.3 percent, and Global TransPark gave up 420 jobs
or 31.3 percent of its total in the furniture manufacturing area.
• In the period from 1990 to 2000, all of North Carolina’s seven Economic
Development Regions except AdvantageWest and Research Triangle (data for
North Carolina’s Eastern region was suppressed for confidentiality reasons)
experienced furniture plant closings. Piedmont Triad recorded the highest rate
at 31, North Carolina’s Southeast region 20, Charlotte Region 9, and Global
TransPark 4.
• Relative to the Southeast region, between 1990 and 2000 North Carolina lost
more than 8,000 furniture jobs compared to furniture job gains recorded by our
closest economic development rivals, Alabama (7,300 or 24.7%), Georgia
(2,000 or 20.2%), and South Carolina (200 or 4.5%). Only Virginia was a net
loser of employment like North Carolina during this period. However, Virginia
lost "only" 1,600 furniture jobs. Furniture manufacturing is important to North
Carolina, employing almost 10 percent of the state's manufacturing workforce
(76,400 jobs), more than 50 percent of these five states' total.
In the final analysis, the issue of globalization is not to “disenfranchise” people
economically. Rather, to empower as many people and corporate entities as possible to
share in the benefits that globalization offers including “lowering costs, expanding
choices, and delivering more capital, giving the individual more power to succeed.”
Consequently, what is required are adequate policy measures and selective support of
the industry that will help to ameliorate the negative impact of globalization on North
Carolina's furniture industry and make the industry a globally competitive force.
Short-run efforts could be directed at delivering effective corporate and civic
leadership, helping the industry partnering with competitors to lower costs and
leveraging the companies through easier financing. The industry needs to evaluate its
business models, evaluate product lines, become more efficient and diversify their
markets, among other things. Schuler and Buehlmann, in a forthcoming USDA Forest
Service General Technical Report entitled "Identifying future competitive business
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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strategies for the U.S. furniture industry: benchmarking and paradigm shifts", are
trying to outline some potential strategies for the survival of the domestic furniture
industry.7
In the long run, the state's effort could be directed at supporting the industry by
strengthening the furniture "center of excellence" in North Carolina. This includes
improving infrastructure, offering up-to-date training opportunities for the industry,
supporting the industry through outreach and reasonable laws in addition to pursuing
all the possibilities inherent in trade policies.
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I. INTRODUCTION
Globalization and free trade is here to stay and North Carolina must deal with it. While
globalization has boosted world trade and economic output, continued to break national
economic barriers, raised living standards, bolstered international investments and
movement of capital, induced technology efficiency and reduced costs, it has made life
difficult for people and industries dislocated by the change. North Carolina's furniture
industry is no exception.
While globalization may not be totally responsible for the dwindling fortunes of North
Carolina’s traditional manufacturing sector including the furniture industry, it is
strongly linked to the decline of the furniture industry. As a result of globalization
many North Carolina furniture companies have adopted cost cutting measures to
counter especially the problem of domestic “high production costs”8 and other
overheads. Strategies of North Carolina manufacturers also include offshore
outsourcing and contracting out to low wage countries in Asia and Latin America,
effectively spurring the erosion of many local furniture jobs and plant closings.
A recent report by the U.S. Bureau of Labor Statistics showed that while
manufacturing unit labor costs (labor compensation per unit of output) declined in
competitive countries including Japan (-6.0 percent), Korea (-4.0 percent), and Taiwan
(-3.5 percent) in 2000, it went up by 1.4 percent in the United States.9 This exacerbates
the tendency for United States’ manufacturers to move operations to low labor cost
overseas countries, consequently shedding local jobs. In the same vein, another related
report indicated that United State’s furniture wage rates were higher than those of the
competition including Mexico, Taiwan, and Hong Kong by up to 80 percent,11 further
luring U.S. manufacturers to relocate overseas, invariably jeopardizing local
manufacturing jobs.
The world economy including the United States has undergone major transformations
in the past decades. The pace of change has been dramatic since the end of the Cold
War and the ascendancy of information and Internet technology. North Carolina is no
exception to this paradigm shift. Aside from the relaxation of Cold War tensions and
the Internet revolution, another major force driving this unprecedented economic
change is the reality of economic globalization as expressed in free trade. Free trade
has opened new markets, sharpened the relevance of a knowledge based global
economy and, at the same time, created new challenges in its wake. To prosper, the
North Carolina furniture industry∗ must tap into the globalization bonanza, and, at the
∗ Establishments engaged in manufacturing household, office, public building, restaurant furniture, and
office and store fixtures – Standard Industrial Classification (SIC 25) or North American Industry
Classification System (NAICS 3371).
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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same time, find ways to ameliorate the negative side effects of the globalization
imperativeb.
Unfortunately, not only has North Carolina's furniture industry not taken full advantage
of the globalization windfall, but also globalization has taken a heavy toll on the
fortunes of this industry. Layoffs and plant closings, a growing dislocated worker
problem, comparative disadvantages, outdated technology, consolidations, downsizing,
mergers, restructurings, etc., are all signs of the growing problem that one of North
Carolina's major industries face. Between 1990 and 2000 (the most recent annual data
available), for example, North Carolina lost nearly 9,000 furniture industry jobs
(almost 10 percent of its original employment).12 This disturbing trend accelerated
significantly in 2001, where almost 10,000 jobs were lost (a loss of 12.8 percent of the
total workforce employed at the NC furniture industry in 2000).13 This trend, according
to preliminary data, is continuing. More disturbing, there seem to be no measures in
place to properly address both real and potential problems facing the industry in the
aftermath of globalization.
What is globalization? How widespread are the impacts of, and what are the
consequences of globalization on North Carolina’s furniture industry? And what are
the implications for public policy?
Globalization
No consensus on the definition of globalization exists. For the purposes of this study,
globalization is defined as the “increasing economic integration of the world
economy.”14 Globalization is not a new phenomenon. In fact, it is a well established
economic practice expressed in various forms, such as, international trade (imports and
exports), foreign direct investments (firms investing in other countries), capital market
flows (foreign and domestic sources of funds including bonds, equities, loans), region
specific market bloc alliances (e.g. North American Free Trade Agreement – NAFTA,
Free Trade Area of the Americas – FTAA, European Union - EU) and global trade
pacts (e.g. the World Trade Organization- WTO, etc.). Yet, not until the dawn of the
1990s did the concept of globalization begin to take hold. Since then, global markets
and institutions continued to grow in importance.
Several studies indicate that the chief cause of this development is technological
progress, especially, the emergence of the Information Age epitomized by the Internet
and the “availability of cheap, rapid, and reliable communications that have cut both
b This report focuses on the furniture industry – however, the reader should keep in mind that there are
significant downstream and upstream industries supporting the furniture industry. For example, the wood
products industry (of which furniture itself is a part) without furniture has about the same size and
importance as the furniture industry and is far larger if wooden building construction is included. Thus,
trends discussed in this report have a multiplier effect throughout North Carolina's economy.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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communication and transportation costs”15 and the emergence of containerized
shipping technology. In tandem, the spread of consumer knowledge, influencing
markets like never before, has required markets to offer more choices and lower prices,
a process that is ongoing. Businesses also realized the competitive advantages of
producing their products in countries that have a comparative advantage, one of which
often is low labor costs. Such advantages offered and offers developing countries an
opportunity for economic growth and increased prosperity. The outstanding example of
this development is China, which tries hard to increase prosperity of its citizens and
provide jobs to everyone17 to keep the pseudo communist party in power. Evidently,
the North Carolina furniture industry is not immune to these globalization boosting
agents and the accompanying consequences.
Latest figures from the U.S. Census Bureau,18 for example, show that, whereas total
U.S. retail sales for the first quarter of 2002 were estimated at $743.8 billion, an
increase of 2.7 percent from the same period a year earlier, U.S. e-commercec retail
sales (unadjusted) for the first quarter of 2002 was $9.849 billion, an increase of 19.3
percent from the first quarter of 2001 (more than seven times the increase of traditional
retail sales). In fact, U.S. e-commerce retail sales has almost doubled since the first
quarter of 1999 (when tracking started) from $5.481 billion to $9.849 billion in the first
quarter of 2002.
Akin to technological advances is the wind of economic liberalization sweeping the
world enhanced by the relaxation of Cold War tensions, diminishing national
boundaries, improved international understanding, easing trade barriers, rising capital
flows and financial exchanges, increasing penetration of technological knowledge, and
ever increasing use of computers, to mention a few.
Purpose of the Study
This study examines the impact of globalization on North Carolina’s traditional
manufacturing industries particularly the furniture industry. While the phenomena of
globalization is extensively researched and documented, none has focused specifically
on the effect of globalization on North Carolina’s furniture industry. Yet, such a study
is of crucial importance to the State, because:
• The State's furniture industry employs roughly 10 percent of all manufacturing
workforce19 mainly in rural, economically less developed rural areas and
shipped $8.02 billions in product in 2000, which is 4.5% of North Carolina's
total manufactured value of shipments ($178.01 billion).20 The furniture
c According to U.S. Department of Commerce, “E-commerce sales are sales of goods and services where
an order is placed by the buyer or price and terms of sale are negotiated over an Internet, extranet,
Electronic Data Interchange (EDI) network, electronic mail, or other online system. Payment may or
may not be made online.”
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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industry added a net $4.2 billion of value to its product in 2000 (4.6 percent), of
a total of $92.46 billion in manufacturing value added in 2000 in North
Carolina.
• Furniture also is a major user of lumber and wood products supplied by the
many suppliers throughout the state. A significant part of the roughly $4.86
billion in value added in 200021 in this supplying industry are consumed by the
State's furniture industry.
• Other industries, such as, retailing, packaging, and transportation among many
others, directly depend on the furniture industry – creating what Porter calls a
"Center of Excellence."22
• The State’s lead economic development agency, the Department of Commerce,
vis-à-vis the Division of Policy, Research, and Strategic Planning’s “think
tank” role, among others, is to evaluate watershed economic events that have
direct impact on the lives, jobs, careers, and well-being of our citizens by
analyzing, interpreting, and communicating those events in a succinct and easy
to understand manner. At the same time the division is supposed to suggest
appropriate policy issues and strategies on a continuing basis to policymakers.
• The State's land grant University, North Carolina State University, which is
home to the Department of Wood and Paper Science and the Wood Products
Extension group, among other entities, has a vital interest in evaluating and
analyzing the state of this major industry. Based on such analytic work,
conclusions can be drawn to support the industry through extension, research,
and teaching.
• As a core industry and major employer in the state, identifying what ails the
furniture industry in the aftermath of globalization is likely to add value to
better understanding the challenges facing similar North Carolina industries.
Measures suggested here to revamp the beleaguered furniture industry could be
proposed, if applicable, to other industries similarly situated.
Scope of the Study
In order to better understand the influences of globalization on North Carolina’s
furniture industry, a long-term (1980-2000) trend examination was conducted. The
study time period is divided into two comparative phases, 1) 1980-1990 and 2) 1991-
2000. We call phase 1 (1980-1990) the "globalization neutral" period and phase 2
(1991-2000) the "globalization sensitive" period. This trend analysis is preferred
because it shields employment data against distortions inherent in short run data sets
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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due to fluctuations in business cycles. The impact analysis covers North Carolina and
its seven Economic Development Regions/Partnerships. d
Furthermore, furniture employment and wages data for the Southeaste region of the
United States (composed of North Carolina and 11 neighboring states) are examined.
Special attention is given to North Carolina's closest "rivals", Alabama, Georgia, and
South Carolina. These three states are North Carolina’s main competitors in respect to
economic development. Therefore, they will serve as an index for comparing the
impacts of globalization on the State’s furniture industry relative to them.
Sources of Data
Historical data on furniture employment and wages from the U.S. Bureau of Labor
Statistics and North Carolina Employment Security Commission for the period 1980 to
2000 were utilized to conduct the analysis. Also, furniture business closings and
permanent layoffs data from the North Carolina Employment Security Commission
(ESC) were utilized to show furniture plants establishment concentration (Figure 11)
across the state, particularly, in the seven economic development partnerships.
d AdvantageWest, Charlotte Region, Global TransPark, North Carolina’s East, North Carolina’s
Southeast, Piedmont Triad, and Research Triangle Partnership.
e Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South
Carolina, Tennessee, Virginia, and West Virginia.
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II. NORTH CAROLINA FURNITURE INDUSTRY TODAY
Furniture is to North Carolina as apple pie is to America. North Carolina has the
envious reputation of producing “more than half of all home furniture used in the
United States,”23 and, for almost a century now, has been described as the “furniture
capital of the world.” This concentration of furniture manufacturing in a small region,
e.g. a "Center of Excellence"24, is widely seen as a competitive advantage, which is not
easily repeated by other regions or countries. As one of the state’s mainstay industries,
furniture is the second (after textile mills) largest factory sector employer, engaging
almost 10 percent of the state’s manufacturing employment, expending more than $2
billion in annual wages. Furniture’s gross state product (GSP), in current dollars,
jumped to $3.2 billion in 2000, up 60 percent from $2.0 billion in 1990.25 (See Figure
1.)
Figure 1: North Carolina Furniture Industry Gross State Product ($b), 1990-
2000
$0
$1
$1
$2
$2
$3
$3
$4
GSP ($b) 2.0 1.9 2.1 2.3 2.5 2.5 2.6 2.7 3.0 3.2 3.2
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: U.S. Bureau of Economic Analysis, “Regional Accounts Data – Gross State
Product Data,” on the web at http://www.bea.doc.gov/bea/regional/gsp/action.cfm
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Wages followed the same expansionist growth pattern. Annual average wage per
worker rose a remarkable 68 percent from $10,712.92 in 1980 to $17,970 in 1990. It
accelerated to $21,732 in 1995 and soared to $27,288 in 200026 (See Figure 2).
Figure 2: North Carolina Furniture Industry Average Annual Wages, 1980-2000
$10,712
$11,613 $11,821
$13 ,248
$14,050 $14,4 89
$15,543
$16,280
$16,820 $ 17,313
$17,970$18 ,203
$19,637
$20,3 24
$21,15 0
$21,732
$22,312
$ 23,774
$25,259
$26,491
$27,288
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: North Carolina Employment Security Commission, “Employment and Wages
by Industry,” on the web at http://www.ncesc.com/lmi/industry/industryMain.asp.
Note: Data for years 1980-1992 are on hardcopy.
However, overall, North Carolina's furniture industry is in decline and faces
considerable pressure from globalization (Figure 3). Between 2000 and 2001, for
example, the U.S. furniture industry lost more than 36,000 jobs (6.5 percent) according
to the U.S. Bureau of Labor Statistics.27 According to the North Carolina Employment
Security Commission (ESC), in 2000, North Carolina's furniture industry employed
1,015 (1.3 percent) less people than it did a year prior. However, 2000 was the last year
of strong economic growth. Since then with the weakening economy and increasing
market pressures from imports, the job losses in the State increased. In 2001, when the
weakening economy softened demand for furniture, North Carolina lost 9,741 jobs
(12.8 percent) of its furniture employment, a trend that is continuing in 2002. These
problems will remain with us for the foreseeable future, no matter the economic
development of the next few years. A continuing sluggish economy simply will
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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increase and speed up further loss of employment, but even in the best economic
scenario, the decline of manufacturing capacity will continue.
In the third quarter of 2001 alone, furniture employment dipped by almost 10 percent
compared to the same period a year earlier, for a record loss of 7,852 jobs.28 This is on
top of the loss in employment experienced between 1990 and 2000. During this time
period (the "globalization sensitive" period), furniture employment levels dropped
sharply from 85,178 to 76,220, shedding almost 9,000 jobs, or more than 10 percent of
industry’s employment29. Most analysts predict no end to this development, as there is
still significant outdated manufacturing capacity in operation. At the same time, due to
the difficult economic times, new investments, capitalization, and modernization are in
dire straits.
With the domestic markets facing strong import pressures, the North Carolina furniture
exports do not offer an alternative market. Although exports, after sliding between
1996 and 2000, rebounded modestly in 2001 by 0.58 percent to $215.6 million from
the previous year.30 However, exports are less than 4 percent31 of total production in
the State. This indicates that, whereas the industry is losing market share due to
imported furniture, it does not take advantage of open foreign markets, e.g. the State's
manufacturing industry isn't able to benefit from globalization so far. This marginal
performance of the state's furniture industry clearly is also due to a strong U.S. dollar,
making exports unduly expensive to buy abroad. However, some experts believe that
the exchange rate is only part of the problem, but that outdated products and not so
stellar quality carry part of the blame, too.
North Carolina furniture manufacturers are making efforts to respond to the challenges
of globalization. However, the low profitability, which is typically earned in the
furniture business, makes sufficient re-investment in plants, equipment, and human
labor difficult. The low profitability of the industry not only reduces the capital
available for reinvestment, but clearly it also defers the infusion of new capital into the
industry since more profitable alternatives exist. Statistics show that the U.S. furniture
industry re-invests a lower percentage of the value of shipments than do other
industries (furniture industry roughly 2 percent versus the average of all U.S.
manufacturing industries approximately 3 percent32). Investments in new technologies
and automated processes, improving existing procedures, and adopting new marketing
strategies are made in a piecemeal fashion. Hickory Chair (Hickory, NC), for example,
uses “Celaschi double-end tenoners” and “Morbidelli” in their Conover, North
Carolina plant. Both pieces of equipments are reflective of new high-speed wood
processing technology that has helped the company increase output, reduce job set-up
time by 60 percent, provide greater manufacturing flexibility, and aid the performance
of multiple tasks on the same machine.33 Other survival measures being pursued by
North Carolina furniture companies include plant upgrades, product customization and
diversification, development of niche markets, export revitalization, skills renewal, and
improved customer service. However, some experts doubt that such piecemeal
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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improvements are sufficient to guarantee the survival of a substantial manufacturing
base in North Carolina.34 For the industry to survive and prosper, a paradigm shift is
needed.35
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Figure 3: Furniture Plant Closings & Layoffs 2001-2002 (50 or more Job Losses)
* Through August 2002
Source: North Carolina Employment Security Commission
Year Company County/City Jobs Affected Reason
2001 Alexvale Furniture Inc. Alexander, Taylorsville 87 Consolidation
Thomasville Furniture Ashe, West Jefferson 239 Sales decline
Southern Furniture Bladen, Elizabethtown 60 Discontinue Mfg.
Drexel Heritage Furnishings Buncombe, Black Mountain 89 Consolidation
Ethan Allen Buncombe, Asheville 116 Consolidation
Broyhill Furniture Caldwell, Lenoir 107 Conversion
Thomasville Furniture Ind. Caldwell, Lenoir 300 Sales decline
Thomasville Furniture Ind. Catawba, Newton 277 Restructuring
Thomasville Furniture Ind. Catawba, Hickory 55 Consolidation
Thomasville Furniture Ind. Davidson, Thomasville 75 Sales decline
Council Companies Davidson, Denton 50 Slow down
Lexington Home Brands Davidson, Lexington 60 Restructuring
The Chair Company Forsyth, Liberty 90 Financial difficulty
Leggett & Platt Inc. Guilford, Greensboro 50 Restructuring
Lea Industries Haywood, Waynesville 256 Business decline
Pallister Furniture Co. Iredell, Troutman 85 Import Competition
Custom Products, Inc. Iredell, Mooresville 56 Contract cancelled
La-Z-Boy, Inc. Lincoln, Lincolnton 130 Discontinued line
Universal Furniture Ltd McDowell, Marion 360 Consolidation
Lexington Home Brands Mitchell, Spruce Pine 297 Cost Cuts
Klaussner Furniture Ind. Randolph, Asheboro 148 Moved operations
Klaussner Furniture Ind. Randolph, Asheboro 120 Restructuring
Caraway Furniture Randolph, Sophia 170 Financial difficulty
Block & Company, Inc. Scotland, Laurinburg 66 Business sold
Universal Furniture Wayne, Goldsboro 61 Mfg. Phase out
American Drew Wilkes, North Wilkesboro 70 Business decline
3474
2002* Drexel Heritage Furnishings Burke, Drexel 120 Restructuring
Drexel Heritage Furnishings Burke, Drexel 175 Consolidation
Bernhardt Furniture Co. Caldwell, Lenoir 80 Industry downturn
La-Z-Boy, Inc. Caldwell, Granite Falls 82 Restructuring
Broyhill Furniture Ind. Caldwell, Lenoir 136 Consolidation
Broyhill Furniture Ind. Catawba, Conover 100 Restructuring
Haworth, Inc. Columbus, Chadbourn 345 Moved
Lexington Home Brands Davidson, Lexington 150 Restructuring
Braxton Culler Guilford County 200 Relocation
Steelcase, Inc. Henderson, Fletcher 150 Business decline
Stanley Furniture Co. Moore, West end 400 Consolidation
Klaussner Furniture Ind. Randolph, Asheboro 133 Consolidation
Cardinal Brands, Inc. Scotland, Laurinburg 120 Relocation
2191
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III. IMPACT OF GLOBALIZATION
While globalization is not responsible alone for the bane of North Carolina’s furniture
industry, this study goes a long way to confirm growing anecdotal evidence that
globalization has taken a serious toll, especially on jobs in North Carolina’s traditional
manufacturing sector including furniture (Figure 3). As a result of globalization (which
has opened more borders), many U.S. furniture companies (NC's companies among
them), have adopted cost cutting measures to counter the problem of domestic “high
production costs”36 and other overheads by outsourcing and contracting out to,
particularly, low wage countries in Asia and Latin America. Wholesale-imported
furniture is, besides domestically in-house manufactured products, for many
companies, a way to stay in business.37,38 Other companies decide to completely
abandon domestic manufacturing to become pure wholesalers focusing on selling
furniture procured from offshore manufacturers.39 Others just cease operation and go
out of business.40
A recent report by the U.S. Bureau of Labor Statistics, for example, showed that while
manufacturing unit labor costs (labor compensation per unit of output) declined in
2000 in competitive countries especially in Asia including Japan by 6.0 percent, Korea
4.0 percent, and Taiwan 3.5 percent, it went up by 1.4 percent in the United States.41
These labor cost fluctuations are not only due to actual costs in the different
economies, but also a function of exchange rates, among other things. Such cost
differentials exacerbate the tendency for United States manufacturers to move
operations overseas in order to cut costs, consequently shedding local jobs. Another
study indicated that the United States' furniture wage rates were higher than those of
the competition including Mexico, Taiwan, and Hong Kong by up to 80 percent.43 At
the same pace as North Carolina's furniture manufacturers contract out the manufacture
of furniture to foreign places, imports from these places increase.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 4: U.S. Furniture Imports and Exports ($000s) Selected Countries, 1999-
2001
Country
1999
Imports
2001
Imports
% Change
1999-2001
China $3,791,590 $5,818,042 53.4
India $67,363 $107,338 59.3
Indonesia $523,352 $594,665 13.6
Korea $82,084 $81,291 -1.0
Malaysia $537,089 $495,144 -7.8
Taiwan $1,138,924 $857,992 -24.7
Thailand $304,546 $343,829 12.9
Argentina $107,813 $229,037 112.4
Brazil $99,125 $185,275 86.9
Mexico $2,908,577 $3,238,015 11.3
Country
1999
Exports
2001
Exports
% Change
1999-2001
China $44,855 $50,781 13.2
India $3,399 $3,816 12.3
Indonesia $3,480 $4,215 21.1
Korea $16,460 $24,162 46.8
Malaysia $6,252 $7,737 23.8
Taiwan $20,804 $14,309 -31.2
Thailand $8,362 $8,070 -3.5
Argentina $12,394 $12,523 1.0
Brazil $36,529 $25,624 -29.9
Mexico $797,312 $968,526 21.5
Source: U.S. Census, Foreign Trade Division. http://www.census.gov/foreign-trade/
www
Globalization has encouraged the relaxation of import control rules and, in the process,
given fillip to increased market penetration of imported cheap furniture, especially
from Asia and Latin America, at the disadvantage of the domestic furniture industry
(Figure 4). The domestic industry is losing market share in spite of a strong housing
market (according to the U.S. Census Bureau between 2000 and 2001 new housing
increased by almost 3 percent). The import preference problem is reinforced by
globalization friendly nuances including the North American Free Trade Agreement –
NAFTA, Free Trade Area of the Americas – FTAA, and the World Trade Organization
- WTO, which favors more open markets (imports now equal 53 percent of domestic
U.S. furniture production and account for 33 percent of U.S. furniture consumption and
is rising rapidly44), thereby flattening domestic furniture production, further eliminating
jobs. The impact of globalization can be demonstrated, for example, in:
North Carolina Furniture Employment Trends 1980-1990 and 1991-2000
Figure 5 shows the total number of manufacturing and furniture jobs in North Carolina
from 1980 to 1990, the annual average number of manufacturing and furniture jobs, the
net job change from 1980 to 1990, and the percent change from 1980 to 1990. In
addition, it shows the percentage of furniture employment to total manufacturing
employment for the period under review. Furthermore, it shows the average percentage
of furniture jobs to total manufacturing employment, and average number of furniture
establishments. Total manufacturing employment increased 34,434 or 4.2 percent from
1980 to 1990. Total furniture employment grew 3,163 or nearly 4 percent during the
same time period. Also, furniture’s share of total manufacturing employment averaged
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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10.2 percent during this period. Collectively, the furniture industry increased its share
of total manufacturing employment from 1980 to 1990. After dipping in 1982, it
recovered rapidly through 1984, decelerated slightly through 1986, peaked in 1988,
and turned down in 1989 for the remainder of the decade, entering the 1990-91
recession (Figure 6).
Figure 5: Jobs in North Carolina Furniture Industry 1980-1990
Year Total Mfg. Jobs Furniture Jobs
% Furniture Jobs to
Total Mfg. Jobs
Number of Furnitue
Employment
Reporting Units
1980 822,021 82,015 10.0 634
1981 821,783 83,909 10.2 687
1982 785,034 79,319 10.1 704
1983 800,469 80,768 10.1 730
1984 835,557 85,639 10.2 772
1985 830,067 84,563 10.2 770
1986 834,787 84,823 10.2 771
1987 843,123 87,684 10.4 800
1988 869,114 90,183 10.4 815
1989 866,804 86,273 10.0 815
1990 856,455 85,178 9.9 826
Annual Average 833,201 84,578 10.2 756.7
1980-1990 Net Change 34,434 3,163 -0.03 192
1980-1990 % Change 4.2 3.9 -0.3 30.3
Source: North Carolina Employment Security Commission.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 6: Employment Trends in North Carolina Furniture Industry 1980-1990
75,000
77,000
79,000
81,000
83,000
85,000
87,000
89,000
91,000
# of Jobs
Jobs 82,015 83,909 79,319 80,768 85,639 84,563 84,823 87,684 90,183 86,273 85,178
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
Source: North Carolina Employment Security Commission.
Beginning in 1990 and fueled by the 1990-91 recession, the once thriving furniture
industry began to shrink. One of the major reasons for this was the onset of economic
globalization marked by increasing across the border outsourcing, contracting out, and
devolutions of operations which in effect spurred pervasive job losses in the local
economy. By the middle of the decade, the furniture industry’s misfortunes have
reached near revolt buttressed by other mutually inclusive free trade factors, such as,
the North American Free Trade Agreement – NAFTA, Free Trade Area of the
Americas – FTAA, World Trade Organization, WTO.
Figure 7 has the same attributes as Figure 5 except that the data is for the 1991 to 2000
period. Total manufacturing employment decreased by 43,954 jobs or 5.3 percent
between 1991 and 2000 compared to the 1980 to 1990 period. Total furniture
employment fell by 2,664 jobs or 3.4 percent between 1991 and 2000 compared to the
1980 to 1990 period. Also, the average percentage of furniture jobs to total
manufacturing employment decreased by 0.9 percent to 9.3 percent between 1991 and
2000 compared to 10.2 percent for the average of the 1980 to 1990 period.
North Carolina Furniture Plant Closings Trends 1980-1990 and 1991-2000
In the "globalization neutral" period, 1980-1990, the state’s total furniture
establishment net gain was 192 (a 30.3% gain) compared to 47 net furniture
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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establishment closings (a 5.5% loss) recorded in the "globalization sensitive" period,
1991-2000 (Figures 5 and 7).
Figure 7: Jobs in North Carolina Furniture Industry 1991-2000
Year Total Mfg. Jobs Furniture Jobs
% Furniture Jobs to
Total Mfg. Jobs
Number of Furnitue
Employment
Reporting Units
1991 827,150 78,884 9.5 862
1992 833,709 78,092 9.4 822
1993 847,315 79,206 9.3 825
1994 860,510 79,878 9.3 836
1995 862,290 78,808 9.1 800
1996 845,071 76,775 9.1 800
1997 836,038 75,757 9.1 831
1998 827,034 75,801 9.2 799
1999 801,017 77,235 9.6 815
2000 783,196 76,220 9.7 815
Annual Average 832,333 77,666 9.3 820.5
1991-2000 Net Change -43,954 -2,664 0.2 -47.0
1991-2000 % Change -5.3 -3.4 2.0 -5.5
Source: North Carolina Employment Security Commission
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 8: Employment Trends in North Carolina Furniture Industry 1991-2000
73,000
74,000
75,000
76,000
77,000
78,000
79,000
80,000
81,000
# of Jobs
Jobs 78,884 78,092 79,206 79,878 78,808 76,775 75,757 75,801 77,235 76,220
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: North Carolina Employment Security Commission
Due to the time lag of statistical data, it is hard to show how dramatically more severe
the situation for North Carolina's furniture industry has become in the past two years
(2001 and 2002). Today, almost two thirds (66 percent) of domestic production is
imported and market penetration of offshore furniture is fast reaching 50 percent.45
Furniture imports from China alone increased by more than $2 billion (a 53.4 percent
increase) in only two years from 1999 to 2001. Whereas the statistics report a drop in
furniture manufacturing employment from 1999 to 2000 of 1,015 jobs, North Carolina
lost 3,474 jobs in 2001 in furniture plants closing with 50 or more job losses and
another 2,191 jobs in 2002 through August for the same category46. Just how desperate
the situation is and how rapidly the job losses are occurring is illustrated in Figure 9
below which summarizes number of employment over the time period from 1980 to
2001.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 9: Summary of Employment Trends in North Carolina Furniture Industry 1980-2001
65,000
70,000
75,000
80,000
85,000
90,000
95,000
# of Jobs
Jobs 82015 83909 79319 80768 85639 84563 84823 87684 90183 86273 85178 78884 78092 79206 79878 78808 76775 75757 75801 77235 76220 66479
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001*
* 4th quarter of 2001
Source: North Carolina Employment Security Commission
There are strong indications that layoffs in 2002 will exceed the ones experienced in
2001, with Thomasville furniture announcing on September 20, 2002 that it will lay off
another 425 employees in Thomasville, North Carolina.47 The data shows that the
furniture industry, which accounts for roughly 10 percent of North Carolina's
employment48 and adds $4.2 billions to the state economy49 per year, is contracting fast
with no bottom in sight. If no decisive actions are taken to support the industry through
public policy, education, and outreach, furniture manufacturing and with it many
supporting industries (e.g. the Furniture Industry Cluster in North Carolina50) will soon
be history. Besides the economic consequences for the State of North Carolina, the
human side of this tragedy is illustrated in Bamberger's and Davidson's book, "The
Closing".51 Yet many experts maintain, although dramatic changes in the way furniture
is manufactured and sold are inevitable, that a prospering industry could be maintained
by taking decisive action at public, industry and individual levels.52,53, 54
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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North Carolina Economic Development Partnerships
North Carolina’s Regions/Partnerships (region and partnership are used
interchangeably) are the microcosm of the State and, whatever impacts the State by
default affects the Partnerships. The furniture industry is no exception especially for
Regions and counties heavily dependent on the furniture industry for jobs and tax
revenues.
There are seven Economic Development Partnerships in the State of North Carolina.
The Partnerships were created in 1993 starting with three Commissions, namely, West,
Northeast, and Southeast “to provide a boost to the West, the Northeast, and Southeast
areas of the state considered most needy of job growth, capital investment, and
additional support from the Department of Commerce.”55 In 1994-1995, the regional
concept was replicated statewide to include all 100 counties and expanded the number
of Partnerships to seven “to leverage efforts, expenditures, and programs to foster
economic growth in all parts of the state.”56
Figure 10 shows the total number of furniture jobs in North Carolina’s seven economic
development partnerships from 1990 to 2000, the net job change, and the percent
change. Furniture employment declined in all of the seven partnerships (data for North
Carolina’s East was suppressed for confidentiality reasons). The hardest hit Region
was Piedmont Triad, losing more than 3,700 jobs or 12.5 percent, followed by
AdvantageWest with 1,731 jobs or 8.1 percent and, Charlotte Region with 1,591 jobs
or 6.4 percent. Research Triangle Partnership shed 1,006 jobs or 33.5 percent, North
Carolina’s Southeast 816 jobs or 56.3 percent, and Global TransPark 420 jobs or 31.3
percent.
Figure 10: Furniture Jobs in NC Economic Development Partnerships 1990-2000
Partnership
Number of
Counties
1990 Number of
Jobs
2000 Number of
Jobs
1990-2000 Net
Job Change
90-00 % Change
Number of Jobs
AdvantageWest 23 21,448 19,717 -1,731 -8.1
Charlotte Region 12 24,779 23,188 -1,591 -6.4
Global TransPark 13 1,341 921 -420 -31.3
North Carolina's East 16 * * * *
North Carolina's Southeast 11 1,450 634 -816 -56.3
Piedmont Triad 12 29,879 26,135 -3,744 -12.5
Research Triangle 13 3,000 1,994 -1,006 -33.5
*Suppressed data
Source: North Carolina Employment Security Commission
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 11 shows the number of furniture establishments in the state’s seven economic
development partnerships (data for North Carolina’s Eastern Region was suppressed
for confidentiality reasons) from 1990 to 2000, the net change from 1990 to 2000, and
percent change from 1990 to 2000. Except Advantage West and Research Triangle
Region, the rest of the partnerships experienced furniture plant closings with Piedmont
Triad recording the highest rate at 31, followed by North Carolina’s Southeast with 20,
Charlotte Region 9, Global TransPark 4.
Figure 11: Furniture Establishments in North Carolina’s Economic Development
Partnerships 1990-2000
Partnership
Number of
Counties
1990 Number of
Employing Units
2000 Number of
Employing Units
1990-2000 Net
Emp. Units
Change
90-00 % Change
Number of
Employing Units
AdvantageWest 23 98 142 44 44.9
Charlotte Region 12 258 249 -9 -3.5
Global TransPark 13 22 18 -4 -18.2
North Carolina's East 16 * * * *
North Carolina's Southeast 11 34 14 -20 -58.8
Piedmont Triad 12 319 288 -31 -9.7
Research Triangle 13 59 63 4 6.8
* Suppressed data
Source: North Carolina Employment Security Commission
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 12: Map Showing Furniture Industry Establishments in North Carolina By
Economic Development Partnership
Courtesy: North Carolina Department of Commerce, MIS Division
U.S. Southeast Region
In order to determine the impact level and consequences of globalization on North
Carolina's furniture industry relative to the Southeast Region, especially, our closest
competitors, namely, Alabama, Georgia, South Carolina, and Virginia, an employment
comparison analysis was performed.
Figure 13 shows the total number of furniture jobs in Alabama, Georgia, North
Carolina, South Carolina, and Virginia in 1990 and 2000, the percent share of furniture
jobs to total manufacturing employment in 1990 and 2000, net furniture job change
between 1990 and 2000, and the percent job change between 1990 and 2000. Between
1990 and 2000, Alabama’s, Georgia’s, and South Carolina’s furniture jobs grew by
7,300 (24.7%); 2,000 (20.2%); and South Carolina 200 (4.5%); respectively, compared
to North Carolina’s loss of more than 8,000 (nearly 10%) of furniture employment
during this period (Figures 13 and 14). Virginia also lost furniture employment,
although only two thirds as much as did North Carolina on a percentage basis. Not only
were Virginia's losses less pronounced than North Carolina's, but Virginia is much less
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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dependent on furniture than is North Carolina. Virginia's share of employment in
furniture is 5.6 percent, slightly more than half of North Carolina's 9.7 percent of all
manufacturing employment. Also, while Alabama, Georgia, and South Carolina
increased their percent share of furniture jobs to total manufacturing employment,
North Carolina’s receded to 9.7 percent in 2000 from 9.8 percent in 1990.
However, while the number of North Carolina’s furniture job losses during the period
under review was overwhelmingly higher than the rest, the result should be interpreted
under consideration of the fact that North Carolina’s 76,400 furniture jobs in 2000 was
more than the combined total of 53,400 for Alabama, Georgia, and South Carolina.
This just underlines the crucial importance of the furniture and wood products
industries to the State. And by default, North Carolina's economy is impacted much
more severely from furniture job losses due to unsavory economic events (for example,
globalization), than are the other states. An interesting question to be asked would be
why was North Carolina losing furniture related jobs when all the other states were
adding employment to its furniture industry. This could indicate an unfavorable
economic environment for furniture manufacturers in the State. Or it may partially be
due to lower or missing support of the industry by the State, or a combination of both.
More research into this area would be of high importance to allow corrective action to
be taken and to support the existing manufacturing base in the State.
Figure 13: Furniture Jobs in Selected Southeast States 1990-2000
*U.S. Bureau of Labor Statistics does not have listings for “Furniture Industry” for
Alabama. Alternatively “Lumber and Wood Products Industry” data was used.
Source: U.S. Bureau of Labor Statistics, “State and Area Employment, Hours,
Earnings,” http://data.bls.gov/cgi-bin/dsrv.
State
1990
Furniture
Jobs
% Share Mfg.
Employment
2000
Furniture
Jobs
% Share Mfg.
Employment
1990-2000
Furniture Net
Job Change
% Change
Furniture Jobs
1990-2000
Alabama* 29,600 7.7 36,900 10.2 7,300 24.7
Georgia 9,900 1.8 11,900 2.0 2,000 20.2
North Carolina 84,700 9.8 76,400 9.7 -8,300 -9.8
South Carolina 4,400 1.1 4,600 1.3 200 4.5
Virginia 23,300 5.5 21,700 5.6 -1,600 -6.9
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 14: Furniture Jobs Trends in Selected Southeast States 1990-2000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
# of Jobs
1990 29,600 9,900 84,700 4,400 23,300
2000 36,900 11,900 76,400 4,600 21,700
Alabama* Georgia North Carolina South Carolina Virginia
Source: U.S. Bureau of Labor Statistics, on the web at http://data.bls.gov/cgi-bin/dsrv
IV. CONCLUSIONS
The full impact of globalization on North Carolina’s traditional industries, including
furniture, may never be known in its entirety. Economic globalization has enhanced
economic possibilities and eliminated barriers to free trade, but at the same time, it has
left many individuals resentful and jobless and, the industries prostrate.57 The
poignancy cannot be missed in the case of North Carolina’s furniture industry.
Although almost all of North Carolina’s traditional industries are suffering under the
weight of economic globalization, the wooden residential furniture industry segment
has been especially hard hit. While total manufacturing employment, for example,
declined by 6.4 percent or 50,500 jobs between 2000 and 2001, furniture employment
fell 7.2 percent or 5,500 during the same time period. 58
While other factors were at work in the North Carolina furniture industry’s distress,
this study found that there is a strong connection between the incidence of
globalization and the perils of the state’s furniture industry markedly manifested in
drastic furniture job losses, especially, through unprecedented cost cutting driven off-shore
outsourcing and devolution of activities, sustained import competition, all of
which encouraged capacity underutilization, redundancy, and jobs displacement. As a
specific pointer, in the "globalization sensitive" period, 1991-2000, the North Carolina
furniture industry’s employment contracted sharply, losing 2,664 net furniture jobs,
compared to 3,163 net furniture jobs gained in the "globalization neutral" period, 1980-
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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1990. Correspondingly, 47 net furniture establishment plant closings were recorded in
the "globalization sensitive" period, 1991-2000, as opposed to an increase of 192 plants
in the "globalization neutral" period, 1980-1990.
This trend of losing furniture-manufacturing employment in the State, which was
established in the 90s, continues and has accelerated significantly through today. In the
third quarter of 2001, North Carolina lost 7,852 furniture-manufacturing jobs59, which
represents more than 10 percent of its total employment in this industry. Since 1988,
the year when direct furniture manufacturing employment peaked at 90,183 (Figure 5)
until August 2002, when we estimate direct furniture manufacturing employment to be
no more than 60,000 (4th qtr 2001 furniture employment data, the most recent
available, released by the NC ESC was 66,479 and since that time more furniture job
losses have been recorded). North Carolina lost more than a third of its employment in
furniture. If indirect jobs in the supplying and retailing industries directly dependent on
furniture manufacturing are counted in, this amounts to a staggering loss of
employment for North Carolina.
Consequently, what is needed within the context of the state’s general economic
revival strategy, is a combination of furniture industry’s reengineering leadership that
insists on innovation and competitive excellence, job training programs that adequately
prepare North Carolinians for the challenges of the New Economy, proactive economic
policies that spur growth and raise incomes, and smart trade policies that would nudge
the state’s traditional industries without inhibiting free entrepreneurship and trade.
V. POLICY ISSUES
At a workshop on “Globalization and North Carolina Industries” in May 2002, Dr.
Edward Fesser of the University of North Carolina at Chapel Hill asked, “how ready is
North Carolina and its regions for the changes that are accompanying increasingly open
markets?” In an answer, Dr. Fesser declared, “bottom line North Carolina is not
prepared.” Dr. Fesser is not alone. In a recent news story on “Free Trade,” the Raleigh,
North Carolina, News & Observer, indicated, “North Carolina’s political and business
elite awoke belatedly to find remedies to workers’ pain, sparked by free trade
agreements.”60 These two commentaries unequivocally underscore the severity of
globalization-induced problems on the State’s economy and the difficult task of
addressing them.
The reality is that the rules of economic engagement have changed and the terrain has
gotten more difficult especially on the heels of free trade. Old-line solutions of
yesterday simply cannot work for the new line problems of today. Conventional
production and assembly lines have given way to robotics and computers that perform
"miracles" unimagined not long ago. And with the North Carolina traditional
manufacturing industries still threatened and furniture industry job losses escalating, it
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 30
has become absolutely necessary for both private and public leadership to offer both
short term and long-term policy measures to reverse the downward trend and other
globalization related travails. North Carolina policy makers must move quickly and
aggressively in this direction. Also, North Carolina leaders must be proactive in their
approach to help workers and businesses “fill the skills gap” and deal with other
economic problems wrought by the New Economy. While efforts are being made to
reposition the state’s traditional industries, however, they are not enough. More needs
to be done. Schuler and Buehlmann61 call for a paradigm shift, which is necessary for
the industry to regain competitiveness domestically and globally. However, such a
shift will take some time and need the support of industry, government, and
educational institutions. In the short run, more pragmatic steps, some of which are
listed below need to be taken.
In the immediate the efforts of the public leadership could be directed at helping the
companies in regards to:
• Delivering effective corporate and civic leadership that is open to new ideas,
friendly to innovation and restructuring, and enthusiastic about ongoing
support.
• Partnering or merging with competitors to reduce costs and other overheads
through outsourcing, consolidation, and short-run component supplies.
• Leveraging better financing including debt management and new credit
facilities to help insolvent and bankrupt companies recapitalize and stay in
business or to allow them to be bought by competitors.
• Evaluating business models and product lines with regard to profitability and
usefulness.
• Outsourcing and Supply Chain Management could be used to dramatically
lower costs, reduce variability of goods manufactured in-house, and to offer
products in niche markets.
• Lean Manufacturing methods will help companies become more competitive
by reducing cost and lead times.
• Reducing management layers including paperwork and routine clerical time
through Internet marketing, automated ordering and billing (EDI), and high
speed communication.
• Diversifying business streams towards optimum allocation of resources and
finding untapped niche markets particularly overseas.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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• Automating including reengineering of production processes towards a more
efficient, flexible, and lower cost but high quality output.
However, the long term survival and growth of the State's furniture industry depends
on making wise public policy decisions and supporting the industry through
establishing a favorable business climate, providing the appropriate infrastructure,
offering help through outreach programs, and helping the industry educate and train a
superior workforce. We must acknowledge that furniture manufacturing evolves from a
low-skill, mass production industry to a high-tech, high capital industry, which is
relying on outsourcing and task specialization at ever increasing speeds. Paradigm
shifts, such as the ones advocated by Buehlmann and Schuler62 and models developed
by others, which the industry has to embrace and implement will require highly
educated individuals and support from facilities at the State's Universities and
Community Colleges.
Thus, some of the long-term efforts could be directed at:
Skill Improvement
1. Education and Job Training – Job skills must be refurbished in line with changing
times and industry demands. However, in North Carolina, even in the wake of
globalization, “providing additional schooling for workers who lost their jobs as a
result of free trade (globalization) is a shining concept tarnished by reality.”63 Studies64
indicate that North Carolina’s job training and education programs for displaced
workers are inadequate and “often miss the target.” In fact, “it has not worked
especially well at being cost effective, improving human capital, or achieving better
wages.” For example, coupled with the problems of limited funding and budget cuts,
“four out of five workers who experience free trade related lay-offs don’t enroll in a
government sponsored retraining program,” and “unemployment benefits of many
workers are not enough to sustain them while they undergo training.” Also, available
training programs are not as flexible as they ought to be and are “not available in
avenues other than community colleges settings,” further restricting access to would be
participants.
Moreover, many of the State’s educational institutions including community colleges
and universities lack the resources to acquire cutting edge machines, equipment, and
computers to train workers on the skills they need to succeed in the era of
globalization. The result is a skill mismatch whereby students are taught “New
Economy” skills with “Old Economy” machines. The North Carolina Community
College System has been at the forefront of providing job training through New and
Expanding Industries Program (NEIP) and the Focused industry Training (FIT)
programs, especially, for dislocated workers. But this is not enough. North Carolina
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 32
needs to invest and do more in training and retraining of workers displaced by
globalization related action and the New Economy.
Training needs to be extended to incumbent workers as well to make them competitive
on their current jobs and, at the same time, increase their chances of better pay and
career growth. In addition, the Community College system and Job Link Centers need
to develop short-term training and fast track certification programs to accommodate the
training needs of those who, although in need of training, do not have large amounts of
time for an extended duration of training. Also, for those already dislocated and
undergoing training, opportunities must be created to allow them to earn money to
supplement their insufficient and terminative unemployment benefits, since many of
them are forced to drop out of training programs to find work to “meet up,” because
their unemployment benefits are exhausted before the completion of their training.
Furthermore, there is an urgent need for better coordination of all of the state’s job
training programs for effective and better results. Currently, existing training programs
are “fragmented and often fail to steer laid-off workers toward growing, well paying
industries.” Above all, for the Community Colleges to continue to be the “state’s best
available resource” to respond to job training needs, additional funds must be provided.
Closely linked to job training is supporting skills acquisition alliance initiatives.
2. Skills Alliance Network – It is a concept that advocates a regional solution to
worker training needs whereby “companies, labor, and government team up to create
training alliances.”65 This concept has grown increasingly popular in recent years
among regions on the realization that “worker training problems cannot be solved at
the federal level” alone, “solutions needs to be regional, diverse, and industry
driven.”66 Also, experience indicates that sometimes federally funded training
programs lack flexibility, making it difficult for effective industry and worker
participation. A “major flaw” of the Workforce Investment Act of 1998, for example, is
that it provides training funds to displaced and disadvantaged workers only, effectively
hindering incumbent workers of needed training.67
A “highly successful” example of a skills alliance network is the “Wisconsin Regional
Training Partnership (WRTP)” created in the 1990s by “business and labor to bolster
family-supporting jobs in a highly competitive manufacturing environment.”68 North
Carolina can do the same. The WRTP focuses on four basic areas: 1) “implementing
new technologies and work processes, 2) educating and training the current workforce,
3) meeting the future workforce challenge, and 4) forge partnerships between public,
private, non-profit organizations to match the training and employment needs of
workers and communities with the labor needs of employers.”69 Furthermore, “WRTP
provides management and labor a forum to share ideas, work together, and to learn best
practices.”70 Success at and completion of job training skills programs is tied to
availability of sustainable training income.
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3. Income – One of the major problems that job training recipients face is lack of
money, especially, the inadequacy of unemployment insurance (UI) pay. Predicated on
federal and state laws, the unemployment insurance program was created to provide
benefits to workers during periods of forced idleness. It pays about half of an
individual’s average weekly earnings, with a cap of $396 per week for a maximum of
26 weeks. Recently, Congress extended North Carolina’s benefits period by 13 weeks
to 39 weeks, including making provision for those who qualify for NAFTA/TAA
(Trade Adjustment Act) related joblessness to receive benefits for up to 52 weeks.
However, the UI program while good, needs reform “if it is going to remain the first
line of defense against hardship and the erosion of assets.”71
Suggested reform measures include: a) urging the North Carolina legislature to make a
“budget provision” geared towards assisting dislocated workers with income to
complete re-training once their UI and NAFTA/TAA benefits are exhausted;” b)
extending the UI benefits duration period from the current 39 weeks, especially, if the
recipient is still experiencing difficulty finding work; c) “maintaining adequate benefits
level and streamlining eligibility requirements;” d) “increasing minimum wage,
promoting livable income, and expanding health care access;” e) removing the “waiting
week” period it takes before UI benefits kicks in to “lessen the burden of
unemployment on workers and their families;” f) upgrading the Family Medical Leave
Act (FMLA – 1993 law that provides leave time to attend to individual and family
health conditions including pregnancy for a maximum of 12 weeks) to include
compensation for lost wages.
Economic Policy
1. Creating New Jobs – Economic changes, whether good or bad, are a fact of life.
The bottom line is that jobs must be created for those who are jobless and the winners’
circle must be expanded. Struggling communities devastated by plant closings and
layoffs must be helped. To buoy the economy, North Carolina leaders must act
proactively and work collegially to address serious economic slump problems
especially unemployment in the aftermath of globalization. North Carolina must
rethink its economic development strategies that worked well in the industrial economy
but fall short of the demands of the New Economy (often referred to as the
Information-based Economy). Furthermore, stimuli are needed in the areas of business
investment incentives, community revitalization, development grants, capacity
building, entrepreneurial training, and capital formation. Job creation strategies
complement business incentives.
2. Better Targeted Incentives - The William S. Lee Act is a business incentive
program created by the North Carolina legislature to give tax breaks to businesses
investing in the state, particularly, in poor rural counties. While this is a step in the
right direction, available evidence indicates that most (“about 67 percent”) of the tax
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 34
credits are not benefiting companies located in targeted areas.72 Instead, they go to the
more affluent urban counties of the state. The business incentives program ought to be
reformed so that more investments and resources are steered to the less prosperous
deserving rural counties. As a demonstration, public policy could “restrict the use of
credits” by “limiting” in favor of poor counties the location where incentive credits
could be deployed, or, by tightening the “jobs and investment criteria that businesses in
affluent counties have to meet.” Business incentives must be extended to small
businesses.
3. Nurturing Small Businesses – According to the Small Business Survival
Committee (SBSC), a Washington, DC, business advocacy group, “a big part of the
American dream for many people is to start up and grow their own business.”73 Small
businesses and entrepreneurships are the lifeblood of U.S. economy. The U.S. Small
Business Administration (SBA) reports, “America’s 25 million small businesses
employ more than 50 percent of the private workforce, contribute more than half of the
nation’s gross state product, and are the main source of new jobs in the U.S.
economy.”74
Specifically, small businesses represent 99.7 percent of all employers; employ 53
percent of private sector workers; provide 75 percent of net new jobs; account for 47
percent of sales in the nation; produce 55 percent of the innovations; account for 35
percent of federal contract dollars; are responsible for 38 percent of high tech jobs; and
represent 96 percent of national exports.75 A recent report by an affiliate of the SBA
classified more than 98 percent of North Carolina’s employers as small business (those
with less than 500 employees), engaging almost half of the private sector workforce.
For the state’s small businesses to continue to grow and create jobs, North Carolina
must not only be perceived as an “entrepreneur-friendly state,” public policy must also
encourage their survival and viability through such policy instruments as low taxes,
regulatory relief, less bureaucracy, access to affordable health care, and improved labor
standards. Provision of “critical infrastructures” especially in rural counties, is
necessary to attract and retain businesses and talented workers.
4. Providing Infrastructure – Infrastructure deficiency or lack of it impedes
economic development. For the rural communities to thrive and compete effectively in
the New Economy, infrastructure must be provided. While applauding past efforts,
many of the state’s rural communities still lag behind their urban counterparts in the
availability of infrastructure services. Specific areas of concern include water/sewer
improvements, competitive natural gas and electricity service rates, affordable Internet
access, and better transportation access. Since most of the rural communities “lack the
ability to pay” to finance needed infrastructure, direct public fiscal intervention is
called for including budget provisions, grants and loans, federal dollars and even
corporate sponsorships. Besides providing "Old Economy infrastructure" we also must
provide for the New Economy76 infrastructure.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 35
5. New Economy Infrastructure - According to the Progressive Policy Institute (PPI),
a Washington, DC think tank, “We need to do a better job of training and educating
new entrants to the workforce and workers dislocated by economic change. Today, to
be competitive, firms are using more technology and reorganizing production processes
in new ways, such as cellular production, use of teams, and other high performance
work organization methods that require higher levels and new kinds of skills.”77 The
PPI is not alone. Professor Lester Thurow from the Massachusetts Institute of
Technology (MIT) correctly stated: “Skilled people are required to discover new
knowledge, invent new ideas and processes, staff the vital production processes, ensure
proper upkeep of intricate equipments, use and apply new products and processes
induced by technology advances.”78 Simply put, to engender innovation and equip her
citizens to win in the New Economy, North Carolina must invest in the knowledge
infrastructure of the 21st century.
It seems that North Carolina is lagging behind and has a lot of catching up to do. Dr.
Edward Feser of the University of North Carolina at Chapel Hill has argued, “in North
Carolina, we are specialized in low-tech, low-wage traditional commodity chains…we
are highly specialized in declining, traditional manufacturing industries…the message
of innovation, learning is not reaching significant segments of our population.”79 This
must change if North Carolina is to be a serious player in the new global economy.
In the industrial economy, investment in “commonly shared resources” including
roads, bridges, rails, airports, seaports, water and electricity supplies was the order of
the day. While these facilities are still indispensable, however, “now for the most part
they benefit localities in which they are located and, are likely to do less for national
productivity.”80 In the information driven global economy that we are in, investments
in new kinds of infrastructure, especially information technology, is the key to success
because its power, effect, and reach is overwhelming, and transcends national
boundaries instantaneously.
North Carolina must rise to the challenge of this irreversible trend. Research indicates
that higher productivity will come mainly from advances in and application of
knowledge, especially application of advanced information technologies.81 Acquisition
of technology is not enough in itself to spur productivity and growth, but the ability of
workers to develop and use these technologies is what makes the difference. Equally
vital is to foster “digital opportunity,” particularly in the underserved North Carolina
communities through Internet access and high-speed communications technologies.
Consequently, in the New Economy, North Carolina must continue to strive to improve
her technology capabilities including support for higher education technology skills,
increasing research and development funding, offering incentives such as matching
grants and tax credits to companies to train workers, as well as bolstering lifelong
learning to keep up with the rapid changes and demands of the Information Age.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 36
Trade Policy
North Carolina has no choice but to share in the benefits as well as in the banes of
globalization. North Carolina leaders can work to influence the reduction of the
undesirable impacts of globalization on its businesses and people by leveraging the
following trade policy options:
1. Advocacy - The message of the benefits of globalization vis-à-vis free trade must
always be reinforced and made unambiguously clear to North Carolinians. At an
economic summit in Davos, Switzerland during his tenure, President Clinton said,
“open markets and rules based trade are the best engine we know of to lift living
standards, reduce environmental destruction and build shared prosperity.”82 Today's
information and transportation technologies further enhance the benefits of the
principle of division of labor83 where outsourcing84 represents a further degree of
specialization of the principle introduced in the seventeenth century and the benefits of
the comparative advantage among nations85. North Carolina is no exception.
Consequently, North Carolina leaders must never tire of advocating for the expansion
of free trade, insisting on the facts that globalization is good for North Carolina.
Trade expansion, for example, provides more markets for the goods and services that
North Carolina companies produce. Also, it improves living standards and ensures the
well being of working families, fosters shared prosperity, encourages competition,
boosts commerce, enhances exports, and protects the environment.86 In addition, trade
expansion swells public revenues through trade taxes and other charges that could be
used to provide needed public services. Moreover, openness to trade not only gives
consumers more choices, it also “provides access to new ideas, technologies, and
methods of production, spurring innovation and development.”87 Leadership advocacy
extends to legislative influence.
2. Legislative Influence – The U.S. Congress may not have the final say on
international Trade Agreements, but it can influence and shape its outcome especially
during the negotiations deliberation process. North Carolina’s Congressional
Delegation must never retreat from working with their colleagues and consulting with
other counterparts to get the best trade deals for the nation and, by extension, North
Carolina. Also, they must always work to provide funding and, press for better
enforcement of trade laws especially “anti-dumpingf” and anti-transshipmentg” rules, to
adequately check trade practices inimical to the national interests including North
Carolina’s economic interests.
f Dumping is the practice of selling products overseas below home market prices, or below the cost of
shipping and production, ostensibly, to stifle competition.
g Transshipping is the practice of evading quotas or avoiding tariffs by shipping through a third party
country.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 37
Another way Congress could influence trade policy is to provide the President with
“fast track” negotiating authorityh. The case must be made that without “fast track,”
“U.S. will be left as observers, losing her opportunity to shape globalization, content to
be simply shaped by it.”88 Also, those “hurt by freer trade” need help. “Broadening”
the assistance eligibility could assist this group, helping dislocated workers with
“health insurance tax credit,” and “wage insurance” benefits to compensate for reduced
pay in their new jobs. Trade policy discussion would be incomplete without mention of
the World Trade Organization (WTO).
3. World Trade Organization Reform – The WTO was organized in 1995 and is
located in Geneva, Switzerland. It is an international organization dealing with rules of
trade between nations.89 It has 144 member nations as of January 1, 2002. While WTO
cannot dictate national policy, it is a rule-based international trading system with some
restrictive clauses and principles, which the public can find overbearing, if not totally
unacceptable at times. As such, it is “not enough for national trade bureaucrats” to have
“confidence” in the WTO, citizens and corporate entities must also be encouraged to do
the same to allay perceived misgivings. As such, it is important to make reforms that
would make WTO activities more open and transparent with due regard to protection
of national security and “proprietary information.”
Also, WTO must strive to bring a balance in the conflict between free trade advocates,
who contend that trade control impairs the market, and environmentalists, who argue
that unrestricted commerce will foster a “race to the bottom” among poor nations with
few or no environmental hurdles as they seek to attract foreign investments. This could
be achieved through broad stakeholders’ consultations in the formulation of trade
policies, information sharing, building links between and WTO and civil society,
making the WTO more inclusive by giving poor nations more say in the affairs of
WTO, preferring dialogue and negotiated settlement over trade sanctions, etc.
Furthermore, the WTO must look into labor standard concerns especially reported
abuses in factories and workhouses around the world that tend to obviate the sentiment
that “development has benefited wealthy multinational companies at the expense of
ordinary workers.” While all labor abuse problems cannot be solved in one fell swoop,
some steps can be taken to improve labor conditions, including, promoting corporate
social responsibility, better enforcement of labor codes, rewarding companies that meet
labor criteria, and improved information access.
h Fast track allows the “President to strike trade deals, which Congress will then vote for or against, but
may not amend.”
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 38
VI: FURNITURE INDUSTRY RESOURCES
Public and private agencies that can assist North Carolina furniture manufacturers find
new markets abroad, answer regulatory and compliance questions, and provide
technical and market consulting.
Organization Address Contact
NC Furniture Export
Office – NC Department
of Commerce/
International Trade Div.
High Point, NC Shannon Neal/Jan Burge
Phone 336-884-8170
sneal@nccommerce.com /
www.exportnc.com
U.S. Department of
Commerce
Greensboro, NC
John Schmonsees / Iris Conner
Phone 336-333-5345
John.Schmonsees@mail.doc.gov
http://www.ustrade.gov/
U.S. Department of
Commerce
Washington, DC
Jamie Ferman
Phone 202-482-5783
Jamie_Ferman@ita.doc.gov
American Furniture
Manufacturers
Association
High Point, NC Phone 336-884-5000
www.afma4u.org
International Home
Furnishings Market
Authority
High Point, NC Phone 336-869-1000
www.highpointmarket.org
Furniture Manufacturing
and Management Center
North Carolina State
University
Raleigh, NC Phone 919-515-3335
www.fmmcenter.ncsu.edu/
Department of Wood and
Paper Science
Wood Products Extension
North Carolina State
University
Raleigh, NC Phone 919.515.5580
www.ces.ncsu.edu/nreos/wood/
Major Industry Publications
Furniture Today
Greensboro, NC
Phone 336-605-0121
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 39
www.furnituretoday.com
InFurniture
High Point, NC
Phone 336-841-3203
http://www.fairchildpub.com
Furniture Design and Manufacturing
Des Plaines IL
Phone 847/390-6700
www.fdmonline.com/
Upholstery Design and Manufacturing
Des Plaines IL
Phone 847/390-6700
www. http://www.udmonline.com/
Wood & Wood Products
Lincolnshire, IL 847-634-434
http://www.iswonline.com/index-wwp.html
Modern Woodworking Magazine
Atlanta, GA
770-418-1301
www.modernwoodworking.com
Wood Digest
Fort Atkinson, WI
920.563.1707
www.woodworkingpro.com/
Major Furniture Trade Fairs
The International Home Furnishings Market (April / October)
High Point, NC
#336-869-1000
www.highpointmarket.org / www.ihfc.com
The Cologne Furniture Fair (IMM) - January
Cologne, Germany
www.moebelmesse.de
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 40
The Birmingham Furniture Fair – January
Birmingham, England
www.thefurnitureshow.co.uk
Expo Mueble (February)
Guadalajara, Mexico
www.afamjal.com.mx
International Furniture Fair – Tokyo – November
Tokyo, Japan
www.idafij.com
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 41
References
1 Urs Buehlmann and Al Schuler. Benchmarking the Wood Household Furniture
Industry: A Basis for Identifying Competitive Business Strategies for Today’s Global
Economy. Proceedings of the NHLA 30th Annual Hardwood Symposium. May 2002..
2 Al Schuler and Urs Buehlmann. Benchmarking the wood household furniture
industry: A basis for identifying competitive business strategies for today’s global
economy. Presentation at the Wood Component Manufacturers' Association (WCMA)
Annual Meeting. San Antonio, TX. April 2002.
3 U.S. Bureau of Labor Statistics (National Employment, Hours, and Earnings).
http://data.bls.gov/cgi-bin/dsrv.
4 North Carolina Employment Security Commission, “Employment and Wages by
Industry.” http://www.ncesc.com/lmi/industry/industryMain.asp
5 Ibid.
6 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2000A/cstw.htm.
7 Al Schuler and Urs Buehlmann. Identifying future competitive business strategies for
the U.S. furniture industry: benchmarking and paradigm shifts. General Technical
Report NE- forthcoming. USDA Forest Service, Radnor, PA. 2003.
8 Urs Buehlmann and Al Schuler, The United States Furniture Industry and Markets –
Now and in the Future, Paper Presented in the Proceedings of the Conference “Bavaria
Innovative,” Rosenheim, Bavaria, March 6-8 2001.
9 U.S. Department of Labor, Bureau of Labor Statistics, International Comparisons of
Labor Productivity and Unit Labor Costs in Manufacturing, Report No. 962, April
2002.
11 Urs Buehlmann and Al Schuler. Benchmarking the Wood Household Furniture
Industry: A Basis for Identifying Competitive Business Strategies for Today’s Global
Economy. Proceedings of the NHLA 29th Annual Hardwood Symposium. May 2002.
12 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2000A/cstw.htm.
13 Ibid.
14 Alan V. Deardorff and Robert M. Stern, What the Public Should Know About
Globalization and the World Trade Organization, Research Seminar in International
Economics, School of Public Policy, The University of Michigan, July 20, 2000.
15 John Williamson, Institute for International Economics (Washington, DC, USA),
Globalization: The Concept, Causes and Consequences, Keynote Address to the
Congress of the Sri Lankan Association for the Advancement of Science, Colombo,
December 15, 1998.
17 Zhenzou, Matthew Forney. 2002. China’s Labor Pains. Time magazine (Asia
edition). June 17, 2002. Vol. 159, No. 23. pp. 40-47.
18 U.S. Bureau of Census. www.census.gov/mrts/www/mrts.html.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 42
19 North Carolina Employment Security Commission, “Employment and Wages by
Industry,” http://www.ncesc.com/lmi/industry/industryMain.asp
20 U.S. Department of Commerce, Bureau of the Census. 2000 Annual Survey of
Manufacturers, Geographic Area Statistics, M00(AS)-3RV. Washington, DC: U.S.
September 2002.
21 Ibid. U.S. Department of Commerce, Bureau of the Census.
22 Michael E. Porter. 1998. Clusters and the New Economics of Competition. Harvard
Business Review, November-December 1998. pp. 77-90.
23 “North Carolina Furniture Guide,” Greensboro: Carolina Publications, Inc. 2002.
24 Michael E. Porter. 1998. On Competition. The Harvard Business Review book series.
Boston, MA.
25 U.S. Bureau of Economic Analysis. http://www.bea/regional/gsp/action.cfm.
26 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2000A/cstw.htm.
27 U.S. Bureau of Labor Statistics (National Employment, Hours, and Earnings).
http://data.bls.gov/cgi-bin/dsrv.
28 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2001Q3/cstw.htm.
29 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2000A/cstw.htm.
30 U.S. Census/Global Trade Information Services, Inc.
http://www.gtis.com/state/login.cfm.
31 This percentage represents exports as a percentage of value of shipments of NAICS
337110, 337121, 337122, and 337211 (total of $6.1 billion) in 1997. U.S.
Census/Geographic Area Series. http://www.census.gov/prod/www/abs/manu-geo.html
32 Al Schuler and Urs Buehlmann. U.S. furniture and wood product industries project.
Presentation at the Furniture Steering Committee meeting at 3M. November 2001.
33Greg Udelhofen, “Addressing Manufacturing Constraints,” Woodworking
Professionals, Cygnus Business Media, May 2000. http:www.woodworking.com
34 Al Schuler and Urs Buehlmann. Identifying future competitive business strategies for
the U.S. furniture industry: benchmarking and paradigm shift. USDA Forest Service
General Technical Report. In review.
35 Ibid; Urs Buehlmann and Al Schuler, 2002.
36 Ibid; Urs Buehlmann and Al Schuler, 2001.
37 Paul Gardner and Fran Daniel. Furniture Manufacturer to cut jobs, close plant in
Winston-Salem, N.C. area. Winston-Salem Journal, September 20, 2002
38 Bennett Voyles. Ethan Allen goes global. Wood & Wood Products. January 2002.
pp. 47-49.
39 McIntosh, Jay. 2001. Lane closing VA plant – old line factories can't match import
values. Furniture Today. Vol. 25, No. 39, pp. 1 and 32.
40 Carlene Hempel and Steve Cannon. A rough end in Marion – lower labor costs,
overhead lure furniture makers overseas. The News and Observer. December 1, 2001.
pp. 1A and 9A.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 43
41 U.S. Department of Labor, Bureau of Labor Statistics, International Comparisons of
Labor Productivity and Unit Labor Costs in Manufacturing, Report No. 962, April
2002.
43 Al Schuler and Urs Buehlmann. Benchmarking the wood household furniture
industry: A basis for identifying competitive business strategies for today’s global
economy. Presentation at the Wood Component Manufacturers' Association (WCMA)
Annual Meeting. San Antonio, TX. April 2002
44 Al Schuler, Russ Taylor, and Phil Araman. Competitiveness of U.S. wood furniture
manufacturers – lessons learned from the softwood moulding industry. Forest Products
Journal. July/August 2001. pp. 14-20.
45 Urs Buehlmann and Al Schuler. Current Trends and Future Strategies for the U.S.
Furniture Industry in the Face of Stiff Competition. Presentation at the NHLA Annual
Hardwood Symposium, Fall Creek Falls, TN. June 2002.
46 North Carolina Employment Security Commission, “Statewide Employment Data,”
http://jobs.esc.state.nc.us/lmi/ces/emp/selst.htm.
47 Ibid. Paul Gardner and Fran Daniel. 2002.
48 Ibid. U.S. Bureau of Labor Statistics
49 Ibid. U.S. Department of Commerce, Bureau of the Census. 2000
50 Ibid. Michael E. Porter. 1998.
51 William Bamberger and Cathy N. Davidson. Closing: The Life and Death of an
American Factory (the Lyndhurst Series on the South). W. W. Norton & Company.
April 1998.
52 Ibid. Schuler and Buehlmann. 2002.
53 Art Raymond, Wyatt Bassett, Ed Jerger, Jeff Ferguson, and Steve Lawser. How to
compete in today's global economy. Keynote Forum & Expo Education Sessions.
Carolinas Expo, Greensboro, NC. February 14, 2002.
54 Anonymous. It isn't over yet – domestic furniture manufacturers still have cards left
to play. Editorial. Hardwood Review Weekly. June 14, 2002, Vol. 18, Issue 40. pp. 1,
21, and 23.
55 North Carolina Partnership for Economic Development, 1995 Annual Report.
56 Ibid.
57 See The Economist, Survey, “Globalization and Its Critics,” September 29, 2001.
58 Ibid. North Carolina Employment Security Commission,
59 Ibid. North Carolina Employment Security Commission
60 The News & Observer (Raleigh, NC), “The High Price of Free Trade – Leaders
Scramble as Job Losses Mount,” August 21, 2002.
61 Ibid. Schuler and Buehlmann, 2002.
62 Ibid. Buehlmann and Schuler, 2002.
63 The News & Observer (Raleigh, NC), “The High Price of Free Trade – Remedy
Misses the Target,” August 19, 2002.
64 Graham E. Watt, North Carolina Dislocated Worker Study: Problems and Prospects,
North Carolina Department of Commerce, May 2002. See also Chris Estes (North
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 44
Carolina Budget & Tax Center), William Schweke and Sara Lawrence (Corporation for
Enterprise Development), Dislocated Workers in North Carolina: Aiding Their
Transition to Good Jobs, North Carolina Justice and Community Development Center,
June 2002.
65 Robert D. Atkinson, “Creating a National Skills Corporation,” Progressive Policy
Institute, Policy Report, Washington, DC, June 14, 2002.
66 Ibid, Robert D. Atkinson, June 14, 2002.
67 Ibid, Graham Watt, May 2002.
68 Wisconsin Regional Training Partnership (WRTP). 1997 Annual Report.
69 Ibid, WRTP 1997.
70 Ibid, WRTP 1997.
71 Ibid, Chris Estes, William Schweke, and Sara Lawrence, June 2002.
72 Ibid, Chris Estes, William Schweke, and Sara Lawrence, June 2002.
73 Raymond Keating, Small Business Survival Index: Ranking the Policy Environment
for Entrepreneurship Across the Nation, Sixth Annual Report, Washington, DC, July
2001.
74 U.S. Small Business Administration’s website, http://ftp.sbaonline.sba.gov/aboutsba
75 U.S. Small Business Administration’s website, http://ftp.sbaonline.sba.gov/aboutsba
76 Michael J. Mandel, The Internet Depression – the Boom, the Bust, and Beyond
(Chapter 2), New York: Basic Books, 2000.
77 Robert D. Atkinson, “Building New Skills for the New Economy,” Backgrounder,
February 1, 1998.
78 Lester Thurow, Building Wealth – New Rules for Individuals, Companies, and
Nations in a Knowledge-Based Economy, New York: Harper Collins Publishers Inc,
1999, p. 130.
79 Edward J. Feser, North Carolina Regions’ Adjustment to Globalization Trends,
Forum on Globalization and the Restructuring of North Carolina Industry: Problems
and Opportunities, Hickory, North Carolina, May 23, 2002.
80 Robert D. Atkinson, “It’s Not Just Roads and Bridges,” Progressive Policy Institute,
Blueprint Magazine, March 25, 2002.
81 Ibid, Robert D. Atkinson, Blueprint Magazine, March 25, 2002.
82 Jenny Bates and Greg Principato, “A Third Way on Trade and Globalization,”
Progressive Policy Institute, Policy Report, July 18, 2000.
83 Adam Smith. The Wealth of Nations. 1776
84 Yardeni, Edward. Ten Big Themes for 2001 & Beyond. Deutsche Bank Alex Brown.
January 2001.
85 David Ricardo. On The Principles of Political Economy and Taxation. John Murray,
Albemarle-Street, London, UK. 1817
86 Jenny Bates and Greg Principato, “A Third Way on Trade and Globalization,”
Progressive Policy Institute, Washington, DC, Policy Report, June 18, 2000.
87 Ibid, Jenny Bates and Greg Principato, June 18, 2000.
88 Ibid, Jenny Bates and Greg Principato, June 18, 2000.
89 What is the WTO? World Trade Organization’s website, http://www.wto.org.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 45
Suggested Readings
1. Thomas L. Friedman, The Lexus and the Olive Tree - Understanding Globalization,
New York: Anchor Books, 2000.
2. Joseph Stiglitz, Globalization and Its Discontents, New York: W.W. Norton &
Company, 2002.
3. George Soros, Globalization, New York: Public Affairs, LLC, 2002.
4. Jeffrey Sachs, “Interlocking Economies: Unlocking the Mysteries of Globalization,”
Foreign Policy, Spring 1998.
5. William Bamberger and Cathy N. Davidson. Closing: The Life and Death of an
American Factory (the Lyndhurst Series on the South). W. W. Norton & Company.
April 1998.

Click tabs to swap between content that is broken into logical sections.

THE IMPACT OF GLOBALIZATION ON NORTH
CAROLINA'S FURNITURE INDUSTRIES
BY
Ucheoma Nwagbara
Policy Analyst
North Carolina Department of Commerce
Policy, Research, and Strategic Planning Division
Urs Buehlmann
Assistant Professor and Extension Specialist
North Carolina State University
Department of Wood and Paper Science
Wood Products Extension
Al Schuler
Research Economist
USDA Forest Service
Northeastern Research Station
December 2002
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 2
TABLE OF CONTENTS
EXECUTIVE SUMMARY............................................................................................. 4
I. INTRODUCTION ....................................................................................................... 7
Globalization ............................................................................................................... 8
Purpose of the Study ................................................................................................... 9
Scope of the Study..................................................................................................... 10
Sources of Data ......................................................................................................... 11
II. NORTH CAROLINA FURNITURE INDUSTRY TODAY ................................... 12
III. IMPACT OF GLOBALIZATION .......................................................................... 17
North Carolina Furniture Employment Trends 1980-1990 and 1991-2000.............. 18
North Carolina Furniture Plant Closings Trends 1980-1990 and 1991-2000 ........... 20
North Carolina Economic Development Partnerships .............................................. 24
*Suppressed data ....................................................................................................... 24
IV. CONCLUSIONS..................................................................................................... 28
V. POLICY ISSUES ..................................................................................................... 29
Skill Improvement..................................................................................................... 31
Economic Policy ....................................................................................................... 33
Trade Policy .............................................................................................................. 36
VI: FURNITURE INDUSTRY RESOURCES............................................................. 38
Organization .................................................................................................................. 38
Address......................................................................................................................... 38
Contact .......................................................................................................................... 38
References ..................................................................................................................... 41
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 3
TABLE OF FIGURES
Figure 1: North Carolina Furniture Industry Gross State Product ($m), 1990-
2000........................................................................................................ 12
Figure 2: North Carolina Furniture Industry Average Annual Wages, 1980-
2000........................................................................................................ 13
Figure 3: Furniture Plant Closings & Layoffs 2001-2002 (50 or more Job
Losses).................................................................................................... 16
Figure 4: U.S. Furniture Imports and Exports ($000s) Selected Countries,
1999-2001............................................................................................... 18
Figure 5: Jobs in North Carolina Furniture Industry 1980-1990 ........................... 19
Figure 6: Employment Trends in North Carolina Furniture Industry 1980-
1990........................................................................................................ 20
Figure 7: Jobs in North Carolina Furniture Industry 1991-2000 ........................... 21
Figure 8: Employment Trends in North Carolina Furniture Industry 1991-
2000........................................................................................................ 22
Figure 9: Summary of Employment Trends in North Carolina Furniture
Industry 1980-2001 ................................................................................ 23
Figure 10: Furniture Jobs in NC Economic Development Partnerships 1990-
2000........................................................................................................ 24
Figure 11: Furniture Establishments in North Carolina’s Economic
Development Partnerships 1990-2000 ................................................... 25
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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EXECUTIVE SUMMARY
Globalization has encouraged the relaxation if not abolishment of import control rules.
In the process it gave fillip to increased penetration of cheap imports, especially from
Asia and Latin America, at the disadvantage of the domestic (furniture) industry. The
industry lost market share in spite of a strong housing market over the last years.1 This
process shows no signs of stopping and the industry continues to lose market share
relative to imports. This is attributable largely to globalization friendly nuances
including the North American Free Trade Agreement – NAFTA, Free Trade Area of
the Americas – FTAA, and the World Trade Organization - WTO, which favors wider
market access. According to Buehlmann and Schuler, imports now equal 53 percent of
domestic U.S. furniture production and account for 33 percent of U.S. consumption2,
thereby flattening domestic furniture production, further eroding jobs.
The numbers forcefully tell the story. Between 2000 and 2001, for example, the U.S.
furniture industry lost more than 36,000 jobs (6.5 percent of nationwide employment)
according to the U.S. Bureau of Labor Statistics.3 According to the North Carolina
Employment Security Commission (ESC), in 2000 (the most recent annual data
available), the North Carolina furniture industry employed 1,015 (1.3 percent) less
people than it did a year prior. In the third quarter of 2001 (most recent quarter
available), furniture employment dipped more than 10 percent compared to the same
period a year earlier, a record of 7,852 job losses.4 Between 1990 and 2000, the
furniture employment level dropped sharply from 85,178 to 76,220, shedding almost
9,000 jobs or more than 10 percent of industry’s employment.5 This trend accelerated
significantly in 2001, when almost 10,000 jobs were lost in one year (a loss of 12.8
percent of the total workforce employed in the North Carolina furniture industry in
2000).6 At the same time, new investments, capitalization, and modernization are in
dire straits; while industry analysts forecast continuing anxiety in the furniture sector.
Specific findings of this study include:
• From 1980 to 1990, the North Carolina furniture industry averaged 84,578 jobs
per year compared to 77,666 average jobs in the period from 1991 to 2000, a
difference of more than 6,900 jobs or 8.2 percent.
• From 1980 to 1990, the North Carolina furniture industry recorded a 3,163 net
job gain compared to a 2,664 net job loss in the period from 1991 to 2000,
indicating more than a 84 percent net job loss.
• From 1980 to 1990, the North Carolina average annual percent of furniture jobs
to total manufacturing employment was 10.2 percent compared to 9.3 percent in
the period from 1991 to 2000, declining almost 1 percent.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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• In the period from 1980 to 1990, North Carolina's total furniture employment
establishment net gain was 192 or 30.3 percent, compared to 47 establishments
closings (-5.5 percent) in the period from 1991-2000.
• Consistent with statewide trends, all of North Carolina’s seven Economic
Development Regions (data for North Carolina’s Eastern region was suppressed
for confidentiality reasons) lost furniture jobs in the period from 1991 to 2000.
The hardest hit Region was the Piedmont Triad which lost more than 3,700 jobs
or 12.5 percent, AdvantageWest lost 1,731 jobs or 8.1 percent and, the
Charlotte Region where 1,591 jobs or 6.4 percent were lost. The Research
Triangle Partnership shed 1,006 jobs or 33.5 percent, North Carolina’s
Southeast lost 816 jobs or 56.3 percent, and Global TransPark gave up 420 jobs
or 31.3 percent of its total in the furniture manufacturing area.
• In the period from 1990 to 2000, all of North Carolina’s seven Economic
Development Regions except AdvantageWest and Research Triangle (data for
North Carolina’s Eastern region was suppressed for confidentiality reasons)
experienced furniture plant closings. Piedmont Triad recorded the highest rate
at 31, North Carolina’s Southeast region 20, Charlotte Region 9, and Global
TransPark 4.
• Relative to the Southeast region, between 1990 and 2000 North Carolina lost
more than 8,000 furniture jobs compared to furniture job gains recorded by our
closest economic development rivals, Alabama (7,300 or 24.7%), Georgia
(2,000 or 20.2%), and South Carolina (200 or 4.5%). Only Virginia was a net
loser of employment like North Carolina during this period. However, Virginia
lost "only" 1,600 furniture jobs. Furniture manufacturing is important to North
Carolina, employing almost 10 percent of the state's manufacturing workforce
(76,400 jobs), more than 50 percent of these five states' total.
In the final analysis, the issue of globalization is not to “disenfranchise” people
economically. Rather, to empower as many people and corporate entities as possible to
share in the benefits that globalization offers including “lowering costs, expanding
choices, and delivering more capital, giving the individual more power to succeed.”
Consequently, what is required are adequate policy measures and selective support of
the industry that will help to ameliorate the negative impact of globalization on North
Carolina's furniture industry and make the industry a globally competitive force.
Short-run efforts could be directed at delivering effective corporate and civic
leadership, helping the industry partnering with competitors to lower costs and
leveraging the companies through easier financing. The industry needs to evaluate its
business models, evaluate product lines, become more efficient and diversify their
markets, among other things. Schuler and Buehlmann, in a forthcoming USDA Forest
Service General Technical Report entitled "Identifying future competitive business
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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strategies for the U.S. furniture industry: benchmarking and paradigm shifts", are
trying to outline some potential strategies for the survival of the domestic furniture
industry.7
In the long run, the state's effort could be directed at supporting the industry by
strengthening the furniture "center of excellence" in North Carolina. This includes
improving infrastructure, offering up-to-date training opportunities for the industry,
supporting the industry through outreach and reasonable laws in addition to pursuing
all the possibilities inherent in trade policies.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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I. INTRODUCTION
Globalization and free trade is here to stay and North Carolina must deal with it. While
globalization has boosted world trade and economic output, continued to break national
economic barriers, raised living standards, bolstered international investments and
movement of capital, induced technology efficiency and reduced costs, it has made life
difficult for people and industries dislocated by the change. North Carolina's furniture
industry is no exception.
While globalization may not be totally responsible for the dwindling fortunes of North
Carolina’s traditional manufacturing sector including the furniture industry, it is
strongly linked to the decline of the furniture industry. As a result of globalization
many North Carolina furniture companies have adopted cost cutting measures to
counter especially the problem of domestic “high production costs”8 and other
overheads. Strategies of North Carolina manufacturers also include offshore
outsourcing and contracting out to low wage countries in Asia and Latin America,
effectively spurring the erosion of many local furniture jobs and plant closings.
A recent report by the U.S. Bureau of Labor Statistics showed that while
manufacturing unit labor costs (labor compensation per unit of output) declined in
competitive countries including Japan (-6.0 percent), Korea (-4.0 percent), and Taiwan
(-3.5 percent) in 2000, it went up by 1.4 percent in the United States.9 This exacerbates
the tendency for United States’ manufacturers to move operations to low labor cost
overseas countries, consequently shedding local jobs. In the same vein, another related
report indicated that United State’s furniture wage rates were higher than those of the
competition including Mexico, Taiwan, and Hong Kong by up to 80 percent,11 further
luring U.S. manufacturers to relocate overseas, invariably jeopardizing local
manufacturing jobs.
The world economy including the United States has undergone major transformations
in the past decades. The pace of change has been dramatic since the end of the Cold
War and the ascendancy of information and Internet technology. North Carolina is no
exception to this paradigm shift. Aside from the relaxation of Cold War tensions and
the Internet revolution, another major force driving this unprecedented economic
change is the reality of economic globalization as expressed in free trade. Free trade
has opened new markets, sharpened the relevance of a knowledge based global
economy and, at the same time, created new challenges in its wake. To prosper, the
North Carolina furniture industry∗ must tap into the globalization bonanza, and, at the
∗ Establishments engaged in manufacturing household, office, public building, restaurant furniture, and
office and store fixtures – Standard Industrial Classification (SIC 25) or North American Industry
Classification System (NAICS 3371).
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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same time, find ways to ameliorate the negative side effects of the globalization
imperativeb.
Unfortunately, not only has North Carolina's furniture industry not taken full advantage
of the globalization windfall, but also globalization has taken a heavy toll on the
fortunes of this industry. Layoffs and plant closings, a growing dislocated worker
problem, comparative disadvantages, outdated technology, consolidations, downsizing,
mergers, restructurings, etc., are all signs of the growing problem that one of North
Carolina's major industries face. Between 1990 and 2000 (the most recent annual data
available), for example, North Carolina lost nearly 9,000 furniture industry jobs
(almost 10 percent of its original employment).12 This disturbing trend accelerated
significantly in 2001, where almost 10,000 jobs were lost (a loss of 12.8 percent of the
total workforce employed at the NC furniture industry in 2000).13 This trend, according
to preliminary data, is continuing. More disturbing, there seem to be no measures in
place to properly address both real and potential problems facing the industry in the
aftermath of globalization.
What is globalization? How widespread are the impacts of, and what are the
consequences of globalization on North Carolina’s furniture industry? And what are
the implications for public policy?
Globalization
No consensus on the definition of globalization exists. For the purposes of this study,
globalization is defined as the “increasing economic integration of the world
economy.”14 Globalization is not a new phenomenon. In fact, it is a well established
economic practice expressed in various forms, such as, international trade (imports and
exports), foreign direct investments (firms investing in other countries), capital market
flows (foreign and domestic sources of funds including bonds, equities, loans), region
specific market bloc alliances (e.g. North American Free Trade Agreement – NAFTA,
Free Trade Area of the Americas – FTAA, European Union - EU) and global trade
pacts (e.g. the World Trade Organization- WTO, etc.). Yet, not until the dawn of the
1990s did the concept of globalization begin to take hold. Since then, global markets
and institutions continued to grow in importance.
Several studies indicate that the chief cause of this development is technological
progress, especially, the emergence of the Information Age epitomized by the Internet
and the “availability of cheap, rapid, and reliable communications that have cut both
b This report focuses on the furniture industry – however, the reader should keep in mind that there are
significant downstream and upstream industries supporting the furniture industry. For example, the wood
products industry (of which furniture itself is a part) without furniture has about the same size and
importance as the furniture industry and is far larger if wooden building construction is included. Thus,
trends discussed in this report have a multiplier effect throughout North Carolina's economy.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 9
communication and transportation costs”15 and the emergence of containerized
shipping technology. In tandem, the spread of consumer knowledge, influencing
markets like never before, has required markets to offer more choices and lower prices,
a process that is ongoing. Businesses also realized the competitive advantages of
producing their products in countries that have a comparative advantage, one of which
often is low labor costs. Such advantages offered and offers developing countries an
opportunity for economic growth and increased prosperity. The outstanding example of
this development is China, which tries hard to increase prosperity of its citizens and
provide jobs to everyone17 to keep the pseudo communist party in power. Evidently,
the North Carolina furniture industry is not immune to these globalization boosting
agents and the accompanying consequences.
Latest figures from the U.S. Census Bureau,18 for example, show that, whereas total
U.S. retail sales for the first quarter of 2002 were estimated at $743.8 billion, an
increase of 2.7 percent from the same period a year earlier, U.S. e-commercec retail
sales (unadjusted) for the first quarter of 2002 was $9.849 billion, an increase of 19.3
percent from the first quarter of 2001 (more than seven times the increase of traditional
retail sales). In fact, U.S. e-commerce retail sales has almost doubled since the first
quarter of 1999 (when tracking started) from $5.481 billion to $9.849 billion in the first
quarter of 2002.
Akin to technological advances is the wind of economic liberalization sweeping the
world enhanced by the relaxation of Cold War tensions, diminishing national
boundaries, improved international understanding, easing trade barriers, rising capital
flows and financial exchanges, increasing penetration of technological knowledge, and
ever increasing use of computers, to mention a few.
Purpose of the Study
This study examines the impact of globalization on North Carolina’s traditional
manufacturing industries particularly the furniture industry. While the phenomena of
globalization is extensively researched and documented, none has focused specifically
on the effect of globalization on North Carolina’s furniture industry. Yet, such a study
is of crucial importance to the State, because:
• The State's furniture industry employs roughly 10 percent of all manufacturing
workforce19 mainly in rural, economically less developed rural areas and
shipped $8.02 billions in product in 2000, which is 4.5% of North Carolina's
total manufactured value of shipments ($178.01 billion).20 The furniture
c According to U.S. Department of Commerce, “E-commerce sales are sales of goods and services where
an order is placed by the buyer or price and terms of sale are negotiated over an Internet, extranet,
Electronic Data Interchange (EDI) network, electronic mail, or other online system. Payment may or
may not be made online.”
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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industry added a net $4.2 billion of value to its product in 2000 (4.6 percent), of
a total of $92.46 billion in manufacturing value added in 2000 in North
Carolina.
• Furniture also is a major user of lumber and wood products supplied by the
many suppliers throughout the state. A significant part of the roughly $4.86
billion in value added in 200021 in this supplying industry are consumed by the
State's furniture industry.
• Other industries, such as, retailing, packaging, and transportation among many
others, directly depend on the furniture industry – creating what Porter calls a
"Center of Excellence."22
• The State’s lead economic development agency, the Department of Commerce,
vis-à-vis the Division of Policy, Research, and Strategic Planning’s “think
tank” role, among others, is to evaluate watershed economic events that have
direct impact on the lives, jobs, careers, and well-being of our citizens by
analyzing, interpreting, and communicating those events in a succinct and easy
to understand manner. At the same time the division is supposed to suggest
appropriate policy issues and strategies on a continuing basis to policymakers.
• The State's land grant University, North Carolina State University, which is
home to the Department of Wood and Paper Science and the Wood Products
Extension group, among other entities, has a vital interest in evaluating and
analyzing the state of this major industry. Based on such analytic work,
conclusions can be drawn to support the industry through extension, research,
and teaching.
• As a core industry and major employer in the state, identifying what ails the
furniture industry in the aftermath of globalization is likely to add value to
better understanding the challenges facing similar North Carolina industries.
Measures suggested here to revamp the beleaguered furniture industry could be
proposed, if applicable, to other industries similarly situated.
Scope of the Study
In order to better understand the influences of globalization on North Carolina’s
furniture industry, a long-term (1980-2000) trend examination was conducted. The
study time period is divided into two comparative phases, 1) 1980-1990 and 2) 1991-
2000. We call phase 1 (1980-1990) the "globalization neutral" period and phase 2
(1991-2000) the "globalization sensitive" period. This trend analysis is preferred
because it shields employment data against distortions inherent in short run data sets
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 11
due to fluctuations in business cycles. The impact analysis covers North Carolina and
its seven Economic Development Regions/Partnerships. d
Furthermore, furniture employment and wages data for the Southeaste region of the
United States (composed of North Carolina and 11 neighboring states) are examined.
Special attention is given to North Carolina's closest "rivals", Alabama, Georgia, and
South Carolina. These three states are North Carolina’s main competitors in respect to
economic development. Therefore, they will serve as an index for comparing the
impacts of globalization on the State’s furniture industry relative to them.
Sources of Data
Historical data on furniture employment and wages from the U.S. Bureau of Labor
Statistics and North Carolina Employment Security Commission for the period 1980 to
2000 were utilized to conduct the analysis. Also, furniture business closings and
permanent layoffs data from the North Carolina Employment Security Commission
(ESC) were utilized to show furniture plants establishment concentration (Figure 11)
across the state, particularly, in the seven economic development partnerships.
d AdvantageWest, Charlotte Region, Global TransPark, North Carolina’s East, North Carolina’s
Southeast, Piedmont Triad, and Research Triangle Partnership.
e Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South
Carolina, Tennessee, Virginia, and West Virginia.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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II. NORTH CAROLINA FURNITURE INDUSTRY TODAY
Furniture is to North Carolina as apple pie is to America. North Carolina has the
envious reputation of producing “more than half of all home furniture used in the
United States,”23 and, for almost a century now, has been described as the “furniture
capital of the world.” This concentration of furniture manufacturing in a small region,
e.g. a "Center of Excellence"24, is widely seen as a competitive advantage, which is not
easily repeated by other regions or countries. As one of the state’s mainstay industries,
furniture is the second (after textile mills) largest factory sector employer, engaging
almost 10 percent of the state’s manufacturing employment, expending more than $2
billion in annual wages. Furniture’s gross state product (GSP), in current dollars,
jumped to $3.2 billion in 2000, up 60 percent from $2.0 billion in 1990.25 (See Figure
1.)
Figure 1: North Carolina Furniture Industry Gross State Product ($b), 1990-
2000
$0
$1
$1
$2
$2
$3
$3
$4
GSP ($b) 2.0 1.9 2.1 2.3 2.5 2.5 2.6 2.7 3.0 3.2 3.2
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: U.S. Bureau of Economic Analysis, “Regional Accounts Data – Gross State
Product Data,” on the web at http://www.bea.doc.gov/bea/regional/gsp/action.cfm
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 13
Wages followed the same expansionist growth pattern. Annual average wage per
worker rose a remarkable 68 percent from $10,712.92 in 1980 to $17,970 in 1990. It
accelerated to $21,732 in 1995 and soared to $27,288 in 200026 (See Figure 2).
Figure 2: North Carolina Furniture Industry Average Annual Wages, 1980-2000
$10,712
$11,613 $11,821
$13 ,248
$14,050 $14,4 89
$15,543
$16,280
$16,820 $ 17,313
$17,970$18 ,203
$19,637
$20,3 24
$21,15 0
$21,732
$22,312
$ 23,774
$25,259
$26,491
$27,288
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: North Carolina Employment Security Commission, “Employment and Wages
by Industry,” on the web at http://www.ncesc.com/lmi/industry/industryMain.asp.
Note: Data for years 1980-1992 are on hardcopy.
However, overall, North Carolina's furniture industry is in decline and faces
considerable pressure from globalization (Figure 3). Between 2000 and 2001, for
example, the U.S. furniture industry lost more than 36,000 jobs (6.5 percent) according
to the U.S. Bureau of Labor Statistics.27 According to the North Carolina Employment
Security Commission (ESC), in 2000, North Carolina's furniture industry employed
1,015 (1.3 percent) less people than it did a year prior. However, 2000 was the last year
of strong economic growth. Since then with the weakening economy and increasing
market pressures from imports, the job losses in the State increased. In 2001, when the
weakening economy softened demand for furniture, North Carolina lost 9,741 jobs
(12.8 percent) of its furniture employment, a trend that is continuing in 2002. These
problems will remain with us for the foreseeable future, no matter the economic
development of the next few years. A continuing sluggish economy simply will
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 14
increase and speed up further loss of employment, but even in the best economic
scenario, the decline of manufacturing capacity will continue.
In the third quarter of 2001 alone, furniture employment dipped by almost 10 percent
compared to the same period a year earlier, for a record loss of 7,852 jobs.28 This is on
top of the loss in employment experienced between 1990 and 2000. During this time
period (the "globalization sensitive" period), furniture employment levels dropped
sharply from 85,178 to 76,220, shedding almost 9,000 jobs, or more than 10 percent of
industry’s employment29. Most analysts predict no end to this development, as there is
still significant outdated manufacturing capacity in operation. At the same time, due to
the difficult economic times, new investments, capitalization, and modernization are in
dire straits.
With the domestic markets facing strong import pressures, the North Carolina furniture
exports do not offer an alternative market. Although exports, after sliding between
1996 and 2000, rebounded modestly in 2001 by 0.58 percent to $215.6 million from
the previous year.30 However, exports are less than 4 percent31 of total production in
the State. This indicates that, whereas the industry is losing market share due to
imported furniture, it does not take advantage of open foreign markets, e.g. the State's
manufacturing industry isn't able to benefit from globalization so far. This marginal
performance of the state's furniture industry clearly is also due to a strong U.S. dollar,
making exports unduly expensive to buy abroad. However, some experts believe that
the exchange rate is only part of the problem, but that outdated products and not so
stellar quality carry part of the blame, too.
North Carolina furniture manufacturers are making efforts to respond to the challenges
of globalization. However, the low profitability, which is typically earned in the
furniture business, makes sufficient re-investment in plants, equipment, and human
labor difficult. The low profitability of the industry not only reduces the capital
available for reinvestment, but clearly it also defers the infusion of new capital into the
industry since more profitable alternatives exist. Statistics show that the U.S. furniture
industry re-invests a lower percentage of the value of shipments than do other
industries (furniture industry roughly 2 percent versus the average of all U.S.
manufacturing industries approximately 3 percent32). Investments in new technologies
and automated processes, improving existing procedures, and adopting new marketing
strategies are made in a piecemeal fashion. Hickory Chair (Hickory, NC), for example,
uses “Celaschi double-end tenoners” and “Morbidelli” in their Conover, North
Carolina plant. Both pieces of equipments are reflective of new high-speed wood
processing technology that has helped the company increase output, reduce job set-up
time by 60 percent, provide greater manufacturing flexibility, and aid the performance
of multiple tasks on the same machine.33 Other survival measures being pursued by
North Carolina furniture companies include plant upgrades, product customization and
diversification, development of niche markets, export revitalization, skills renewal, and
improved customer service. However, some experts doubt that such piecemeal
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 15
improvements are sufficient to guarantee the survival of a substantial manufacturing
base in North Carolina.34 For the industry to survive and prosper, a paradigm shift is
needed.35
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 3: Furniture Plant Closings & Layoffs 2001-2002 (50 or more Job Losses)
* Through August 2002
Source: North Carolina Employment Security Commission
Year Company County/City Jobs Affected Reason
2001 Alexvale Furniture Inc. Alexander, Taylorsville 87 Consolidation
Thomasville Furniture Ashe, West Jefferson 239 Sales decline
Southern Furniture Bladen, Elizabethtown 60 Discontinue Mfg.
Drexel Heritage Furnishings Buncombe, Black Mountain 89 Consolidation
Ethan Allen Buncombe, Asheville 116 Consolidation
Broyhill Furniture Caldwell, Lenoir 107 Conversion
Thomasville Furniture Ind. Caldwell, Lenoir 300 Sales decline
Thomasville Furniture Ind. Catawba, Newton 277 Restructuring
Thomasville Furniture Ind. Catawba, Hickory 55 Consolidation
Thomasville Furniture Ind. Davidson, Thomasville 75 Sales decline
Council Companies Davidson, Denton 50 Slow down
Lexington Home Brands Davidson, Lexington 60 Restructuring
The Chair Company Forsyth, Liberty 90 Financial difficulty
Leggett & Platt Inc. Guilford, Greensboro 50 Restructuring
Lea Industries Haywood, Waynesville 256 Business decline
Pallister Furniture Co. Iredell, Troutman 85 Import Competition
Custom Products, Inc. Iredell, Mooresville 56 Contract cancelled
La-Z-Boy, Inc. Lincoln, Lincolnton 130 Discontinued line
Universal Furniture Ltd McDowell, Marion 360 Consolidation
Lexington Home Brands Mitchell, Spruce Pine 297 Cost Cuts
Klaussner Furniture Ind. Randolph, Asheboro 148 Moved operations
Klaussner Furniture Ind. Randolph, Asheboro 120 Restructuring
Caraway Furniture Randolph, Sophia 170 Financial difficulty
Block & Company, Inc. Scotland, Laurinburg 66 Business sold
Universal Furniture Wayne, Goldsboro 61 Mfg. Phase out
American Drew Wilkes, North Wilkesboro 70 Business decline
3474
2002* Drexel Heritage Furnishings Burke, Drexel 120 Restructuring
Drexel Heritage Furnishings Burke, Drexel 175 Consolidation
Bernhardt Furniture Co. Caldwell, Lenoir 80 Industry downturn
La-Z-Boy, Inc. Caldwell, Granite Falls 82 Restructuring
Broyhill Furniture Ind. Caldwell, Lenoir 136 Consolidation
Broyhill Furniture Ind. Catawba, Conover 100 Restructuring
Haworth, Inc. Columbus, Chadbourn 345 Moved
Lexington Home Brands Davidson, Lexington 150 Restructuring
Braxton Culler Guilford County 200 Relocation
Steelcase, Inc. Henderson, Fletcher 150 Business decline
Stanley Furniture Co. Moore, West end 400 Consolidation
Klaussner Furniture Ind. Randolph, Asheboro 133 Consolidation
Cardinal Brands, Inc. Scotland, Laurinburg 120 Relocation
2191
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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III. IMPACT OF GLOBALIZATION
While globalization is not responsible alone for the bane of North Carolina’s furniture
industry, this study goes a long way to confirm growing anecdotal evidence that
globalization has taken a serious toll, especially on jobs in North Carolina’s traditional
manufacturing sector including furniture (Figure 3). As a result of globalization (which
has opened more borders), many U.S. furniture companies (NC's companies among
them), have adopted cost cutting measures to counter the problem of domestic “high
production costs”36 and other overheads by outsourcing and contracting out to,
particularly, low wage countries in Asia and Latin America. Wholesale-imported
furniture is, besides domestically in-house manufactured products, for many
companies, a way to stay in business.37,38 Other companies decide to completely
abandon domestic manufacturing to become pure wholesalers focusing on selling
furniture procured from offshore manufacturers.39 Others just cease operation and go
out of business.40
A recent report by the U.S. Bureau of Labor Statistics, for example, showed that while
manufacturing unit labor costs (labor compensation per unit of output) declined in
2000 in competitive countries especially in Asia including Japan by 6.0 percent, Korea
4.0 percent, and Taiwan 3.5 percent, it went up by 1.4 percent in the United States.41
These labor cost fluctuations are not only due to actual costs in the different
economies, but also a function of exchange rates, among other things. Such cost
differentials exacerbate the tendency for United States manufacturers to move
operations overseas in order to cut costs, consequently shedding local jobs. Another
study indicated that the United States' furniture wage rates were higher than those of
the competition including Mexico, Taiwan, and Hong Kong by up to 80 percent.43 At
the same pace as North Carolina's furniture manufacturers contract out the manufacture
of furniture to foreign places, imports from these places increase.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 4: U.S. Furniture Imports and Exports ($000s) Selected Countries, 1999-
2001
Country
1999
Imports
2001
Imports
% Change
1999-2001
China $3,791,590 $5,818,042 53.4
India $67,363 $107,338 59.3
Indonesia $523,352 $594,665 13.6
Korea $82,084 $81,291 -1.0
Malaysia $537,089 $495,144 -7.8
Taiwan $1,138,924 $857,992 -24.7
Thailand $304,546 $343,829 12.9
Argentina $107,813 $229,037 112.4
Brazil $99,125 $185,275 86.9
Mexico $2,908,577 $3,238,015 11.3
Country
1999
Exports
2001
Exports
% Change
1999-2001
China $44,855 $50,781 13.2
India $3,399 $3,816 12.3
Indonesia $3,480 $4,215 21.1
Korea $16,460 $24,162 46.8
Malaysia $6,252 $7,737 23.8
Taiwan $20,804 $14,309 -31.2
Thailand $8,362 $8,070 -3.5
Argentina $12,394 $12,523 1.0
Brazil $36,529 $25,624 -29.9
Mexico $797,312 $968,526 21.5
Source: U.S. Census, Foreign Trade Division. http://www.census.gov/foreign-trade/
www
Globalization has encouraged the relaxation of import control rules and, in the process,
given fillip to increased market penetration of imported cheap furniture, especially
from Asia and Latin America, at the disadvantage of the domestic furniture industry
(Figure 4). The domestic industry is losing market share in spite of a strong housing
market (according to the U.S. Census Bureau between 2000 and 2001 new housing
increased by almost 3 percent). The import preference problem is reinforced by
globalization friendly nuances including the North American Free Trade Agreement –
NAFTA, Free Trade Area of the Americas – FTAA, and the World Trade Organization
- WTO, which favors more open markets (imports now equal 53 percent of domestic
U.S. furniture production and account for 33 percent of U.S. furniture consumption and
is rising rapidly44), thereby flattening domestic furniture production, further eliminating
jobs. The impact of globalization can be demonstrated, for example, in:
North Carolina Furniture Employment Trends 1980-1990 and 1991-2000
Figure 5 shows the total number of manufacturing and furniture jobs in North Carolina
from 1980 to 1990, the annual average number of manufacturing and furniture jobs, the
net job change from 1980 to 1990, and the percent change from 1980 to 1990. In
addition, it shows the percentage of furniture employment to total manufacturing
employment for the period under review. Furthermore, it shows the average percentage
of furniture jobs to total manufacturing employment, and average number of furniture
establishments. Total manufacturing employment increased 34,434 or 4.2 percent from
1980 to 1990. Total furniture employment grew 3,163 or nearly 4 percent during the
same time period. Also, furniture’s share of total manufacturing employment averaged
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 19
10.2 percent during this period. Collectively, the furniture industry increased its share
of total manufacturing employment from 1980 to 1990. After dipping in 1982, it
recovered rapidly through 1984, decelerated slightly through 1986, peaked in 1988,
and turned down in 1989 for the remainder of the decade, entering the 1990-91
recession (Figure 6).
Figure 5: Jobs in North Carolina Furniture Industry 1980-1990
Year Total Mfg. Jobs Furniture Jobs
% Furniture Jobs to
Total Mfg. Jobs
Number of Furnitue
Employment
Reporting Units
1980 822,021 82,015 10.0 634
1981 821,783 83,909 10.2 687
1982 785,034 79,319 10.1 704
1983 800,469 80,768 10.1 730
1984 835,557 85,639 10.2 772
1985 830,067 84,563 10.2 770
1986 834,787 84,823 10.2 771
1987 843,123 87,684 10.4 800
1988 869,114 90,183 10.4 815
1989 866,804 86,273 10.0 815
1990 856,455 85,178 9.9 826
Annual Average 833,201 84,578 10.2 756.7
1980-1990 Net Change 34,434 3,163 -0.03 192
1980-1990 % Change 4.2 3.9 -0.3 30.3
Source: North Carolina Employment Security Commission.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 6: Employment Trends in North Carolina Furniture Industry 1980-1990
75,000
77,000
79,000
81,000
83,000
85,000
87,000
89,000
91,000
# of Jobs
Jobs 82,015 83,909 79,319 80,768 85,639 84,563 84,823 87,684 90,183 86,273 85,178
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
Source: North Carolina Employment Security Commission.
Beginning in 1990 and fueled by the 1990-91 recession, the once thriving furniture
industry began to shrink. One of the major reasons for this was the onset of economic
globalization marked by increasing across the border outsourcing, contracting out, and
devolutions of operations which in effect spurred pervasive job losses in the local
economy. By the middle of the decade, the furniture industry’s misfortunes have
reached near revolt buttressed by other mutually inclusive free trade factors, such as,
the North American Free Trade Agreement – NAFTA, Free Trade Area of the
Americas – FTAA, World Trade Organization, WTO.
Figure 7 has the same attributes as Figure 5 except that the data is for the 1991 to 2000
period. Total manufacturing employment decreased by 43,954 jobs or 5.3 percent
between 1991 and 2000 compared to the 1980 to 1990 period. Total furniture
employment fell by 2,664 jobs or 3.4 percent between 1991 and 2000 compared to the
1980 to 1990 period. Also, the average percentage of furniture jobs to total
manufacturing employment decreased by 0.9 percent to 9.3 percent between 1991 and
2000 compared to 10.2 percent for the average of the 1980 to 1990 period.
North Carolina Furniture Plant Closings Trends 1980-1990 and 1991-2000
In the "globalization neutral" period, 1980-1990, the state’s total furniture
establishment net gain was 192 (a 30.3% gain) compared to 47 net furniture
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 21
establishment closings (a 5.5% loss) recorded in the "globalization sensitive" period,
1991-2000 (Figures 5 and 7).
Figure 7: Jobs in North Carolina Furniture Industry 1991-2000
Year Total Mfg. Jobs Furniture Jobs
% Furniture Jobs to
Total Mfg. Jobs
Number of Furnitue
Employment
Reporting Units
1991 827,150 78,884 9.5 862
1992 833,709 78,092 9.4 822
1993 847,315 79,206 9.3 825
1994 860,510 79,878 9.3 836
1995 862,290 78,808 9.1 800
1996 845,071 76,775 9.1 800
1997 836,038 75,757 9.1 831
1998 827,034 75,801 9.2 799
1999 801,017 77,235 9.6 815
2000 783,196 76,220 9.7 815
Annual Average 832,333 77,666 9.3 820.5
1991-2000 Net Change -43,954 -2,664 0.2 -47.0
1991-2000 % Change -5.3 -3.4 2.0 -5.5
Source: North Carolina Employment Security Commission
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 8: Employment Trends in North Carolina Furniture Industry 1991-2000
73,000
74,000
75,000
76,000
77,000
78,000
79,000
80,000
81,000
# of Jobs
Jobs 78,884 78,092 79,206 79,878 78,808 76,775 75,757 75,801 77,235 76,220
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: North Carolina Employment Security Commission
Due to the time lag of statistical data, it is hard to show how dramatically more severe
the situation for North Carolina's furniture industry has become in the past two years
(2001 and 2002). Today, almost two thirds (66 percent) of domestic production is
imported and market penetration of offshore furniture is fast reaching 50 percent.45
Furniture imports from China alone increased by more than $2 billion (a 53.4 percent
increase) in only two years from 1999 to 2001. Whereas the statistics report a drop in
furniture manufacturing employment from 1999 to 2000 of 1,015 jobs, North Carolina
lost 3,474 jobs in 2001 in furniture plants closing with 50 or more job losses and
another 2,191 jobs in 2002 through August for the same category46. Just how desperate
the situation is and how rapidly the job losses are occurring is illustrated in Figure 9
below which summarizes number of employment over the time period from 1980 to
2001.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 9: Summary of Employment Trends in North Carolina Furniture Industry 1980-2001
65,000
70,000
75,000
80,000
85,000
90,000
95,000
# of Jobs
Jobs 82015 83909 79319 80768 85639 84563 84823 87684 90183 86273 85178 78884 78092 79206 79878 78808 76775 75757 75801 77235 76220 66479
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001*
* 4th quarter of 2001
Source: North Carolina Employment Security Commission
There are strong indications that layoffs in 2002 will exceed the ones experienced in
2001, with Thomasville furniture announcing on September 20, 2002 that it will lay off
another 425 employees in Thomasville, North Carolina.47 The data shows that the
furniture industry, which accounts for roughly 10 percent of North Carolina's
employment48 and adds $4.2 billions to the state economy49 per year, is contracting fast
with no bottom in sight. If no decisive actions are taken to support the industry through
public policy, education, and outreach, furniture manufacturing and with it many
supporting industries (e.g. the Furniture Industry Cluster in North Carolina50) will soon
be history. Besides the economic consequences for the State of North Carolina, the
human side of this tragedy is illustrated in Bamberger's and Davidson's book, "The
Closing".51 Yet many experts maintain, although dramatic changes in the way furniture
is manufactured and sold are inevitable, that a prospering industry could be maintained
by taking decisive action at public, industry and individual levels.52,53, 54
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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North Carolina Economic Development Partnerships
North Carolina’s Regions/Partnerships (region and partnership are used
interchangeably) are the microcosm of the State and, whatever impacts the State by
default affects the Partnerships. The furniture industry is no exception especially for
Regions and counties heavily dependent on the furniture industry for jobs and tax
revenues.
There are seven Economic Development Partnerships in the State of North Carolina.
The Partnerships were created in 1993 starting with three Commissions, namely, West,
Northeast, and Southeast “to provide a boost to the West, the Northeast, and Southeast
areas of the state considered most needy of job growth, capital investment, and
additional support from the Department of Commerce.”55 In 1994-1995, the regional
concept was replicated statewide to include all 100 counties and expanded the number
of Partnerships to seven “to leverage efforts, expenditures, and programs to foster
economic growth in all parts of the state.”56
Figure 10 shows the total number of furniture jobs in North Carolina’s seven economic
development partnerships from 1990 to 2000, the net job change, and the percent
change. Furniture employment declined in all of the seven partnerships (data for North
Carolina’s East was suppressed for confidentiality reasons). The hardest hit Region
was Piedmont Triad, losing more than 3,700 jobs or 12.5 percent, followed by
AdvantageWest with 1,731 jobs or 8.1 percent and, Charlotte Region with 1,591 jobs
or 6.4 percent. Research Triangle Partnership shed 1,006 jobs or 33.5 percent, North
Carolina’s Southeast 816 jobs or 56.3 percent, and Global TransPark 420 jobs or 31.3
percent.
Figure 10: Furniture Jobs in NC Economic Development Partnerships 1990-2000
Partnership
Number of
Counties
1990 Number of
Jobs
2000 Number of
Jobs
1990-2000 Net
Job Change
90-00 % Change
Number of Jobs
AdvantageWest 23 21,448 19,717 -1,731 -8.1
Charlotte Region 12 24,779 23,188 -1,591 -6.4
Global TransPark 13 1,341 921 -420 -31.3
North Carolina's East 16 * * * *
North Carolina's Southeast 11 1,450 634 -816 -56.3
Piedmont Triad 12 29,879 26,135 -3,744 -12.5
Research Triangle 13 3,000 1,994 -1,006 -33.5
*Suppressed data
Source: North Carolina Employment Security Commission
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 11 shows the number of furniture establishments in the state’s seven economic
development partnerships (data for North Carolina’s Eastern Region was suppressed
for confidentiality reasons) from 1990 to 2000, the net change from 1990 to 2000, and
percent change from 1990 to 2000. Except Advantage West and Research Triangle
Region, the rest of the partnerships experienced furniture plant closings with Piedmont
Triad recording the highest rate at 31, followed by North Carolina’s Southeast with 20,
Charlotte Region 9, Global TransPark 4.
Figure 11: Furniture Establishments in North Carolina’s Economic Development
Partnerships 1990-2000
Partnership
Number of
Counties
1990 Number of
Employing Units
2000 Number of
Employing Units
1990-2000 Net
Emp. Units
Change
90-00 % Change
Number of
Employing Units
AdvantageWest 23 98 142 44 44.9
Charlotte Region 12 258 249 -9 -3.5
Global TransPark 13 22 18 -4 -18.2
North Carolina's East 16 * * * *
North Carolina's Southeast 11 34 14 -20 -58.8
Piedmont Triad 12 319 288 -31 -9.7
Research Triangle 13 59 63 4 6.8
* Suppressed data
Source: North Carolina Employment Security Commission
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 26
Figure 12: Map Showing Furniture Industry Establishments in North Carolina By
Economic Development Partnership
Courtesy: North Carolina Department of Commerce, MIS Division
U.S. Southeast Region
In order to determine the impact level and consequences of globalization on North
Carolina's furniture industry relative to the Southeast Region, especially, our closest
competitors, namely, Alabama, Georgia, South Carolina, and Virginia, an employment
comparison analysis was performed.
Figure 13 shows the total number of furniture jobs in Alabama, Georgia, North
Carolina, South Carolina, and Virginia in 1990 and 2000, the percent share of furniture
jobs to total manufacturing employment in 1990 and 2000, net furniture job change
between 1990 and 2000, and the percent job change between 1990 and 2000. Between
1990 and 2000, Alabama’s, Georgia’s, and South Carolina’s furniture jobs grew by
7,300 (24.7%); 2,000 (20.2%); and South Carolina 200 (4.5%); respectively, compared
to North Carolina’s loss of more than 8,000 (nearly 10%) of furniture employment
during this period (Figures 13 and 14). Virginia also lost furniture employment,
although only two thirds as much as did North Carolina on a percentage basis. Not only
were Virginia's losses less pronounced than North Carolina's, but Virginia is much less
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 27
dependent on furniture than is North Carolina. Virginia's share of employment in
furniture is 5.6 percent, slightly more than half of North Carolina's 9.7 percent of all
manufacturing employment. Also, while Alabama, Georgia, and South Carolina
increased their percent share of furniture jobs to total manufacturing employment,
North Carolina’s receded to 9.7 percent in 2000 from 9.8 percent in 1990.
However, while the number of North Carolina’s furniture job losses during the period
under review was overwhelmingly higher than the rest, the result should be interpreted
under consideration of the fact that North Carolina’s 76,400 furniture jobs in 2000 was
more than the combined total of 53,400 for Alabama, Georgia, and South Carolina.
This just underlines the crucial importance of the furniture and wood products
industries to the State. And by default, North Carolina's economy is impacted much
more severely from furniture job losses due to unsavory economic events (for example,
globalization), than are the other states. An interesting question to be asked would be
why was North Carolina losing furniture related jobs when all the other states were
adding employment to its furniture industry. This could indicate an unfavorable
economic environment for furniture manufacturers in the State. Or it may partially be
due to lower or missing support of the industry by the State, or a combination of both.
More research into this area would be of high importance to allow corrective action to
be taken and to support the existing manufacturing base in the State.
Figure 13: Furniture Jobs in Selected Southeast States 1990-2000
*U.S. Bureau of Labor Statistics does not have listings for “Furniture Industry” for
Alabama. Alternatively “Lumber and Wood Products Industry” data was used.
Source: U.S. Bureau of Labor Statistics, “State and Area Employment, Hours,
Earnings,” http://data.bls.gov/cgi-bin/dsrv.
State
1990
Furniture
Jobs
% Share Mfg.
Employment
2000
Furniture
Jobs
% Share Mfg.
Employment
1990-2000
Furniture Net
Job Change
% Change
Furniture Jobs
1990-2000
Alabama* 29,600 7.7 36,900 10.2 7,300 24.7
Georgia 9,900 1.8 11,900 2.0 2,000 20.2
North Carolina 84,700 9.8 76,400 9.7 -8,300 -9.8
South Carolina 4,400 1.1 4,600 1.3 200 4.5
Virginia 23,300 5.5 21,700 5.6 -1,600 -6.9
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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Figure 14: Furniture Jobs Trends in Selected Southeast States 1990-2000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
# of Jobs
1990 29,600 9,900 84,700 4,400 23,300
2000 36,900 11,900 76,400 4,600 21,700
Alabama* Georgia North Carolina South Carolina Virginia
Source: U.S. Bureau of Labor Statistics, on the web at http://data.bls.gov/cgi-bin/dsrv
IV. CONCLUSIONS
The full impact of globalization on North Carolina’s traditional industries, including
furniture, may never be known in its entirety. Economic globalization has enhanced
economic possibilities and eliminated barriers to free trade, but at the same time, it has
left many individuals resentful and jobless and, the industries prostrate.57 The
poignancy cannot be missed in the case of North Carolina’s furniture industry.
Although almost all of North Carolina’s traditional industries are suffering under the
weight of economic globalization, the wooden residential furniture industry segment
has been especially hard hit. While total manufacturing employment, for example,
declined by 6.4 percent or 50,500 jobs between 2000 and 2001, furniture employment
fell 7.2 percent or 5,500 during the same time period. 58
While other factors were at work in the North Carolina furniture industry’s distress,
this study found that there is a strong connection between the incidence of
globalization and the perils of the state’s furniture industry markedly manifested in
drastic furniture job losses, especially, through unprecedented cost cutting driven off-shore
outsourcing and devolution of activities, sustained import competition, all of
which encouraged capacity underutilization, redundancy, and jobs displacement. As a
specific pointer, in the "globalization sensitive" period, 1991-2000, the North Carolina
furniture industry’s employment contracted sharply, losing 2,664 net furniture jobs,
compared to 3,163 net furniture jobs gained in the "globalization neutral" period, 1980-
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 29
1990. Correspondingly, 47 net furniture establishment plant closings were recorded in
the "globalization sensitive" period, 1991-2000, as opposed to an increase of 192 plants
in the "globalization neutral" period, 1980-1990.
This trend of losing furniture-manufacturing employment in the State, which was
established in the 90s, continues and has accelerated significantly through today. In the
third quarter of 2001, North Carolina lost 7,852 furniture-manufacturing jobs59, which
represents more than 10 percent of its total employment in this industry. Since 1988,
the year when direct furniture manufacturing employment peaked at 90,183 (Figure 5)
until August 2002, when we estimate direct furniture manufacturing employment to be
no more than 60,000 (4th qtr 2001 furniture employment data, the most recent
available, released by the NC ESC was 66,479 and since that time more furniture job
losses have been recorded). North Carolina lost more than a third of its employment in
furniture. If indirect jobs in the supplying and retailing industries directly dependent on
furniture manufacturing are counted in, this amounts to a staggering loss of
employment for North Carolina.
Consequently, what is needed within the context of the state’s general economic
revival strategy, is a combination of furniture industry’s reengineering leadership that
insists on innovation and competitive excellence, job training programs that adequately
prepare North Carolinians for the challenges of the New Economy, proactive economic
policies that spur growth and raise incomes, and smart trade policies that would nudge
the state’s traditional industries without inhibiting free entrepreneurship and trade.
V. POLICY ISSUES
At a workshop on “Globalization and North Carolina Industries” in May 2002, Dr.
Edward Fesser of the University of North Carolina at Chapel Hill asked, “how ready is
North Carolina and its regions for the changes that are accompanying increasingly open
markets?” In an answer, Dr. Fesser declared, “bottom line North Carolina is not
prepared.” Dr. Fesser is not alone. In a recent news story on “Free Trade,” the Raleigh,
North Carolina, News & Observer, indicated, “North Carolina’s political and business
elite awoke belatedly to find remedies to workers’ pain, sparked by free trade
agreements.”60 These two commentaries unequivocally underscore the severity of
globalization-induced problems on the State’s economy and the difficult task of
addressing them.
The reality is that the rules of economic engagement have changed and the terrain has
gotten more difficult especially on the heels of free trade. Old-line solutions of
yesterday simply cannot work for the new line problems of today. Conventional
production and assembly lines have given way to robotics and computers that perform
"miracles" unimagined not long ago. And with the North Carolina traditional
manufacturing industries still threatened and furniture industry job losses escalating, it
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 30
has become absolutely necessary for both private and public leadership to offer both
short term and long-term policy measures to reverse the downward trend and other
globalization related travails. North Carolina policy makers must move quickly and
aggressively in this direction. Also, North Carolina leaders must be proactive in their
approach to help workers and businesses “fill the skills gap” and deal with other
economic problems wrought by the New Economy. While efforts are being made to
reposition the state’s traditional industries, however, they are not enough. More needs
to be done. Schuler and Buehlmann61 call for a paradigm shift, which is necessary for
the industry to regain competitiveness domestically and globally. However, such a
shift will take some time and need the support of industry, government, and
educational institutions. In the short run, more pragmatic steps, some of which are
listed below need to be taken.
In the immediate the efforts of the public leadership could be directed at helping the
companies in regards to:
• Delivering effective corporate and civic leadership that is open to new ideas,
friendly to innovation and restructuring, and enthusiastic about ongoing
support.
• Partnering or merging with competitors to reduce costs and other overheads
through outsourcing, consolidation, and short-run component supplies.
• Leveraging better financing including debt management and new credit
facilities to help insolvent and bankrupt companies recapitalize and stay in
business or to allow them to be bought by competitors.
• Evaluating business models and product lines with regard to profitability and
usefulness.
• Outsourcing and Supply Chain Management could be used to dramatically
lower costs, reduce variability of goods manufactured in-house, and to offer
products in niche markets.
• Lean Manufacturing methods will help companies become more competitive
by reducing cost and lead times.
• Reducing management layers including paperwork and routine clerical time
through Internet marketing, automated ordering and billing (EDI), and high
speed communication.
• Diversifying business streams towards optimum allocation of resources and
finding untapped niche markets particularly overseas.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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• Automating including reengineering of production processes towards a more
efficient, flexible, and lower cost but high quality output.
However, the long term survival and growth of the State's furniture industry depends
on making wise public policy decisions and supporting the industry through
establishing a favorable business climate, providing the appropriate infrastructure,
offering help through outreach programs, and helping the industry educate and train a
superior workforce. We must acknowledge that furniture manufacturing evolves from a
low-skill, mass production industry to a high-tech, high capital industry, which is
relying on outsourcing and task specialization at ever increasing speeds. Paradigm
shifts, such as the ones advocated by Buehlmann and Schuler62 and models developed
by others, which the industry has to embrace and implement will require highly
educated individuals and support from facilities at the State's Universities and
Community Colleges.
Thus, some of the long-term efforts could be directed at:
Skill Improvement
1. Education and Job Training – Job skills must be refurbished in line with changing
times and industry demands. However, in North Carolina, even in the wake of
globalization, “providing additional schooling for workers who lost their jobs as a
result of free trade (globalization) is a shining concept tarnished by reality.”63 Studies64
indicate that North Carolina’s job training and education programs for displaced
workers are inadequate and “often miss the target.” In fact, “it has not worked
especially well at being cost effective, improving human capital, or achieving better
wages.” For example, coupled with the problems of limited funding and budget cuts,
“four out of five workers who experience free trade related lay-offs don’t enroll in a
government sponsored retraining program,” and “unemployment benefits of many
workers are not enough to sustain them while they undergo training.” Also, available
training programs are not as flexible as they ought to be and are “not available in
avenues other than community colleges settings,” further restricting access to would be
participants.
Moreover, many of the State’s educational institutions including community colleges
and universities lack the resources to acquire cutting edge machines, equipment, and
computers to train workers on the skills they need to succeed in the era of
globalization. The result is a skill mismatch whereby students are taught “New
Economy” skills with “Old Economy” machines. The North Carolina Community
College System has been at the forefront of providing job training through New and
Expanding Industries Program (NEIP) and the Focused industry Training (FIT)
programs, especially, for dislocated workers. But this is not enough. North Carolina
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 32
needs to invest and do more in training and retraining of workers displaced by
globalization related action and the New Economy.
Training needs to be extended to incumbent workers as well to make them competitive
on their current jobs and, at the same time, increase their chances of better pay and
career growth. In addition, the Community College system and Job Link Centers need
to develop short-term training and fast track certification programs to accommodate the
training needs of those who, although in need of training, do not have large amounts of
time for an extended duration of training. Also, for those already dislocated and
undergoing training, opportunities must be created to allow them to earn money to
supplement their insufficient and terminative unemployment benefits, since many of
them are forced to drop out of training programs to find work to “meet up,” because
their unemployment benefits are exhausted before the completion of their training.
Furthermore, there is an urgent need for better coordination of all of the state’s job
training programs for effective and better results. Currently, existing training programs
are “fragmented and often fail to steer laid-off workers toward growing, well paying
industries.” Above all, for the Community Colleges to continue to be the “state’s best
available resource” to respond to job training needs, additional funds must be provided.
Closely linked to job training is supporting skills acquisition alliance initiatives.
2. Skills Alliance Network – It is a concept that advocates a regional solution to
worker training needs whereby “companies, labor, and government team up to create
training alliances.”65 This concept has grown increasingly popular in recent years
among regions on the realization that “worker training problems cannot be solved at
the federal level” alone, “solutions needs to be regional, diverse, and industry
driven.”66 Also, experience indicates that sometimes federally funded training
programs lack flexibility, making it difficult for effective industry and worker
participation. A “major flaw” of the Workforce Investment Act of 1998, for example, is
that it provides training funds to displaced and disadvantaged workers only, effectively
hindering incumbent workers of needed training.67
A “highly successful” example of a skills alliance network is the “Wisconsin Regional
Training Partnership (WRTP)” created in the 1990s by “business and labor to bolster
family-supporting jobs in a highly competitive manufacturing environment.”68 North
Carolina can do the same. The WRTP focuses on four basic areas: 1) “implementing
new technologies and work processes, 2) educating and training the current workforce,
3) meeting the future workforce challenge, and 4) forge partnerships between public,
private, non-profit organizations to match the training and employment needs of
workers and communities with the labor needs of employers.”69 Furthermore, “WRTP
provides management and labor a forum to share ideas, work together, and to learn best
practices.”70 Success at and completion of job training skills programs is tied to
availability of sustainable training income.
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3. Income – One of the major problems that job training recipients face is lack of
money, especially, the inadequacy of unemployment insurance (UI) pay. Predicated on
federal and state laws, the unemployment insurance program was created to provide
benefits to workers during periods of forced idleness. It pays about half of an
individual’s average weekly earnings, with a cap of $396 per week for a maximum of
26 weeks. Recently, Congress extended North Carolina’s benefits period by 13 weeks
to 39 weeks, including making provision for those who qualify for NAFTA/TAA
(Trade Adjustment Act) related joblessness to receive benefits for up to 52 weeks.
However, the UI program while good, needs reform “if it is going to remain the first
line of defense against hardship and the erosion of assets.”71
Suggested reform measures include: a) urging the North Carolina legislature to make a
“budget provision” geared towards assisting dislocated workers with income to
complete re-training once their UI and NAFTA/TAA benefits are exhausted;” b)
extending the UI benefits duration period from the current 39 weeks, especially, if the
recipient is still experiencing difficulty finding work; c) “maintaining adequate benefits
level and streamlining eligibility requirements;” d) “increasing minimum wage,
promoting livable income, and expanding health care access;” e) removing the “waiting
week” period it takes before UI benefits kicks in to “lessen the burden of
unemployment on workers and their families;” f) upgrading the Family Medical Leave
Act (FMLA – 1993 law that provides leave time to attend to individual and family
health conditions including pregnancy for a maximum of 12 weeks) to include
compensation for lost wages.
Economic Policy
1. Creating New Jobs – Economic changes, whether good or bad, are a fact of life.
The bottom line is that jobs must be created for those who are jobless and the winners’
circle must be expanded. Struggling communities devastated by plant closings and
layoffs must be helped. To buoy the economy, North Carolina leaders must act
proactively and work collegially to address serious economic slump problems
especially unemployment in the aftermath of globalization. North Carolina must
rethink its economic development strategies that worked well in the industrial economy
but fall short of the demands of the New Economy (often referred to as the
Information-based Economy). Furthermore, stimuli are needed in the areas of business
investment incentives, community revitalization, development grants, capacity
building, entrepreneurial training, and capital formation. Job creation strategies
complement business incentives.
2. Better Targeted Incentives - The William S. Lee Act is a business incentive
program created by the North Carolina legislature to give tax breaks to businesses
investing in the state, particularly, in poor rural counties. While this is a step in the
right direction, available evidence indicates that most (“about 67 percent”) of the tax
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 34
credits are not benefiting companies located in targeted areas.72 Instead, they go to the
more affluent urban counties of the state. The business incentives program ought to be
reformed so that more investments and resources are steered to the less prosperous
deserving rural counties. As a demonstration, public policy could “restrict the use of
credits” by “limiting” in favor of poor counties the location where incentive credits
could be deployed, or, by tightening the “jobs and investment criteria that businesses in
affluent counties have to meet.” Business incentives must be extended to small
businesses.
3. Nurturing Small Businesses – According to the Small Business Survival
Committee (SBSC), a Washington, DC, business advocacy group, “a big part of the
American dream for many people is to start up and grow their own business.”73 Small
businesses and entrepreneurships are the lifeblood of U.S. economy. The U.S. Small
Business Administration (SBA) reports, “America’s 25 million small businesses
employ more than 50 percent of the private workforce, contribute more than half of the
nation’s gross state product, and are the main source of new jobs in the U.S.
economy.”74
Specifically, small businesses represent 99.7 percent of all employers; employ 53
percent of private sector workers; provide 75 percent of net new jobs; account for 47
percent of sales in the nation; produce 55 percent of the innovations; account for 35
percent of federal contract dollars; are responsible for 38 percent of high tech jobs; and
represent 96 percent of national exports.75 A recent report by an affiliate of the SBA
classified more than 98 percent of North Carolina’s employers as small business (those
with less than 500 employees), engaging almost half of the private sector workforce.
For the state’s small businesses to continue to grow and create jobs, North Carolina
must not only be perceived as an “entrepreneur-friendly state,” public policy must also
encourage their survival and viability through such policy instruments as low taxes,
regulatory relief, less bureaucracy, access to affordable health care, and improved labor
standards. Provision of “critical infrastructures” especially in rural counties, is
necessary to attract and retain businesses and talented workers.
4. Providing Infrastructure – Infrastructure deficiency or lack of it impedes
economic development. For the rural communities to thrive and compete effectively in
the New Economy, infrastructure must be provided. While applauding past efforts,
many of the state’s rural communities still lag behind their urban counterparts in the
availability of infrastructure services. Specific areas of concern include water/sewer
improvements, competitive natural gas and electricity service rates, affordable Internet
access, and better transportation access. Since most of the rural communities “lack the
ability to pay” to finance needed infrastructure, direct public fiscal intervention is
called for including budget provisions, grants and loans, federal dollars and even
corporate sponsorships. Besides providing "Old Economy infrastructure" we also must
provide for the New Economy76 infrastructure.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
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5. New Economy Infrastructure - According to the Progressive Policy Institute (PPI),
a Washington, DC think tank, “We need to do a better job of training and educating
new entrants to the workforce and workers dislocated by economic change. Today, to
be competitive, firms are using more technology and reorganizing production processes
in new ways, such as cellular production, use of teams, and other high performance
work organization methods that require higher levels and new kinds of skills.”77 The
PPI is not alone. Professor Lester Thurow from the Massachusetts Institute of
Technology (MIT) correctly stated: “Skilled people are required to discover new
knowledge, invent new ideas and processes, staff the vital production processes, ensure
proper upkeep of intricate equipments, use and apply new products and processes
induced by technology advances.”78 Simply put, to engender innovation and equip her
citizens to win in the New Economy, North Carolina must invest in the knowledge
infrastructure of the 21st century.
It seems that North Carolina is lagging behind and has a lot of catching up to do. Dr.
Edward Feser of the University of North Carolina at Chapel Hill has argued, “in North
Carolina, we are specialized in low-tech, low-wage traditional commodity chains…we
are highly specialized in declining, traditional manufacturing industries…the message
of innovation, learning is not reaching significant segments of our population.”79 This
must change if North Carolina is to be a serious player in the new global economy.
In the industrial economy, investment in “commonly shared resources” including
roads, bridges, rails, airports, seaports, water and electricity supplies was the order of
the day. While these facilities are still indispensable, however, “now for the most part
they benefit localities in which they are located and, are likely to do less for national
productivity.”80 In the information driven global economy that we are in, investments
in new kinds of infrastructure, especially information technology, is the key to success
because its power, effect, and reach is overwhelming, and transcends national
boundaries instantaneously.
North Carolina must rise to the challenge of this irreversible trend. Research indicates
that higher productivity will come mainly from advances in and application of
knowledge, especially application of advanced information technologies.81 Acquisition
of technology is not enough in itself to spur productivity and growth, but the ability of
workers to develop and use these technologies is what makes the difference. Equally
vital is to foster “digital opportunity,” particularly in the underserved North Carolina
communities through Internet access and high-speed communications technologies.
Consequently, in the New Economy, North Carolina must continue to strive to improve
her technology capabilities including support for higher education technology skills,
increasing research and development funding, offering incentives such as matching
grants and tax credits to companies to train workers, as well as bolstering lifelong
learning to keep up with the rapid changes and demands of the Information Age.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 36
Trade Policy
North Carolina has no choice but to share in the benefits as well as in the banes of
globalization. North Carolina leaders can work to influence the reduction of the
undesirable impacts of globalization on its businesses and people by leveraging the
following trade policy options:
1. Advocacy - The message of the benefits of globalization vis-à-vis free trade must
always be reinforced and made unambiguously clear to North Carolinians. At an
economic summit in Davos, Switzerland during his tenure, President Clinton said,
“open markets and rules based trade are the best engine we know of to lift living
standards, reduce environmental destruction and build shared prosperity.”82 Today's
information and transportation technologies further enhance the benefits of the
principle of division of labor83 where outsourcing84 represents a further degree of
specialization of the principle introduced in the seventeenth century and the benefits of
the comparative advantage among nations85. North Carolina is no exception.
Consequently, North Carolina leaders must never tire of advocating for the expansion
of free trade, insisting on the facts that globalization is good for North Carolina.
Trade expansion, for example, provides more markets for the goods and services that
North Carolina companies produce. Also, it improves living standards and ensures the
well being of working families, fosters shared prosperity, encourages competition,
boosts commerce, enhances exports, and protects the environment.86 In addition, trade
expansion swells public revenues through trade taxes and other charges that could be
used to provide needed public services. Moreover, openness to trade not only gives
consumers more choices, it also “provides access to new ideas, technologies, and
methods of production, spurring innovation and development.”87 Leadership advocacy
extends to legislative influence.
2. Legislative Influence – The U.S. Congress may not have the final say on
international Trade Agreements, but it can influence and shape its outcome especially
during the negotiations deliberation process. North Carolina’s Congressional
Delegation must never retreat from working with their colleagues and consulting with
other counterparts to get the best trade deals for the nation and, by extension, North
Carolina. Also, they must always work to provide funding and, press for better
enforcement of trade laws especially “anti-dumpingf” and anti-transshipmentg” rules, to
adequately check trade practices inimical to the national interests including North
Carolina’s economic interests.
f Dumping is the practice of selling products overseas below home market prices, or below the cost of
shipping and production, ostensibly, to stifle competition.
g Transshipping is the practice of evading quotas or avoiding tariffs by shipping through a third party
country.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 37
Another way Congress could influence trade policy is to provide the President with
“fast track” negotiating authorityh. The case must be made that without “fast track,”
“U.S. will be left as observers, losing her opportunity to shape globalization, content to
be simply shaped by it.”88 Also, those “hurt by freer trade” need help. “Broadening”
the assistance eligibility could assist this group, helping dislocated workers with
“health insurance tax credit,” and “wage insurance” benefits to compensate for reduced
pay in their new jobs. Trade policy discussion would be incomplete without mention of
the World Trade Organization (WTO).
3. World Trade Organization Reform – The WTO was organized in 1995 and is
located in Geneva, Switzerland. It is an international organization dealing with rules of
trade between nations.89 It has 144 member nations as of January 1, 2002. While WTO
cannot dictate national policy, it is a rule-based international trading system with some
restrictive clauses and principles, which the public can find overbearing, if not totally
unacceptable at times. As such, it is “not enough for national trade bureaucrats” to have
“confidence” in the WTO, citizens and corporate entities must also be encouraged to do
the same to allay perceived misgivings. As such, it is important to make reforms that
would make WTO activities more open and transparent with due regard to protection
of national security and “proprietary information.”
Also, WTO must strive to bring a balance in the conflict between free trade advocates,
who contend that trade control impairs the market, and environmentalists, who argue
that unrestricted commerce will foster a “race to the bottom” among poor nations with
few or no environmental hurdles as they seek to attract foreign investments. This could
be achieved through broad stakeholders’ consultations in the formulation of trade
policies, information sharing, building links between and WTO and civil society,
making the WTO more inclusive by giving poor nations more say in the affairs of
WTO, preferring dialogue and negotiated settlement over trade sanctions, etc.
Furthermore, the WTO must look into labor standard concerns especially reported
abuses in factories and workhouses around the world that tend to obviate the sentiment
that “development has benefited wealthy multinational companies at the expense of
ordinary workers.” While all labor abuse problems cannot be solved in one fell swoop,
some steps can be taken to improve labor conditions, including, promoting corporate
social responsibility, better enforcement of labor codes, rewarding companies that meet
labor criteria, and improved information access.
h Fast track allows the “President to strike trade deals, which Congress will then vote for or against, but
may not amend.”
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 38
VI: FURNITURE INDUSTRY RESOURCES
Public and private agencies that can assist North Carolina furniture manufacturers find
new markets abroad, answer regulatory and compliance questions, and provide
technical and market consulting.
Organization Address Contact
NC Furniture Export
Office – NC Department
of Commerce/
International Trade Div.
High Point, NC Shannon Neal/Jan Burge
Phone 336-884-8170
sneal@nccommerce.com /
www.exportnc.com
U.S. Department of
Commerce
Greensboro, NC
John Schmonsees / Iris Conner
Phone 336-333-5345
John.Schmonsees@mail.doc.gov
http://www.ustrade.gov/
U.S. Department of
Commerce
Washington, DC
Jamie Ferman
Phone 202-482-5783
Jamie_Ferman@ita.doc.gov
American Furniture
Manufacturers
Association
High Point, NC Phone 336-884-5000
www.afma4u.org
International Home
Furnishings Market
Authority
High Point, NC Phone 336-869-1000
www.highpointmarket.org
Furniture Manufacturing
and Management Center
North Carolina State
University
Raleigh, NC Phone 919-515-3335
www.fmmcenter.ncsu.edu/
Department of Wood and
Paper Science
Wood Products Extension
North Carolina State
University
Raleigh, NC Phone 919.515.5580
www.ces.ncsu.edu/nreos/wood/
Major Industry Publications
Furniture Today
Greensboro, NC
Phone 336-605-0121
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 39
www.furnituretoday.com
InFurniture
High Point, NC
Phone 336-841-3203
http://www.fairchildpub.com
Furniture Design and Manufacturing
Des Plaines IL
Phone 847/390-6700
www.fdmonline.com/
Upholstery Design and Manufacturing
Des Plaines IL
Phone 847/390-6700
www. http://www.udmonline.com/
Wood & Wood Products
Lincolnshire, IL 847-634-434
http://www.iswonline.com/index-wwp.html
Modern Woodworking Magazine
Atlanta, GA
770-418-1301
www.modernwoodworking.com
Wood Digest
Fort Atkinson, WI
920.563.1707
www.woodworkingpro.com/
Major Furniture Trade Fairs
The International Home Furnishings Market (April / October)
High Point, NC
#336-869-1000
www.highpointmarket.org / www.ihfc.com
The Cologne Furniture Fair (IMM) - January
Cologne, Germany
www.moebelmesse.de
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 40
The Birmingham Furniture Fair – January
Birmingham, England
www.thefurnitureshow.co.uk
Expo Mueble (February)
Guadalajara, Mexico
www.afamjal.com.mx
International Furniture Fair – Tokyo – November
Tokyo, Japan
www.idafij.com
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 41
References
1 Urs Buehlmann and Al Schuler. Benchmarking the Wood Household Furniture
Industry: A Basis for Identifying Competitive Business Strategies for Today’s Global
Economy. Proceedings of the NHLA 30th Annual Hardwood Symposium. May 2002..
2 Al Schuler and Urs Buehlmann. Benchmarking the wood household furniture
industry: A basis for identifying competitive business strategies for today’s global
economy. Presentation at the Wood Component Manufacturers' Association (WCMA)
Annual Meeting. San Antonio, TX. April 2002.
3 U.S. Bureau of Labor Statistics (National Employment, Hours, and Earnings).
http://data.bls.gov/cgi-bin/dsrv.
4 North Carolina Employment Security Commission, “Employment and Wages by
Industry.” http://www.ncesc.com/lmi/industry/industryMain.asp
5 Ibid.
6 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2000A/cstw.htm.
7 Al Schuler and Urs Buehlmann. Identifying future competitive business strategies for
the U.S. furniture industry: benchmarking and paradigm shifts. General Technical
Report NE- forthcoming. USDA Forest Service, Radnor, PA. 2003.
8 Urs Buehlmann and Al Schuler, The United States Furniture Industry and Markets –
Now and in the Future, Paper Presented in the Proceedings of the Conference “Bavaria
Innovative,” Rosenheim, Bavaria, March 6-8 2001.
9 U.S. Department of Labor, Bureau of Labor Statistics, International Comparisons of
Labor Productivity and Unit Labor Costs in Manufacturing, Report No. 962, April
2002.
11 Urs Buehlmann and Al Schuler. Benchmarking the Wood Household Furniture
Industry: A Basis for Identifying Competitive Business Strategies for Today’s Global
Economy. Proceedings of the NHLA 29th Annual Hardwood Symposium. May 2002.
12 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2000A/cstw.htm.
13 Ibid.
14 Alan V. Deardorff and Robert M. Stern, What the Public Should Know About
Globalization and the World Trade Organization, Research Seminar in International
Economics, School of Public Policy, The University of Michigan, July 20, 2000.
15 John Williamson, Institute for International Economics (Washington, DC, USA),
Globalization: The Concept, Causes and Consequences, Keynote Address to the
Congress of the Sri Lankan Association for the Advancement of Science, Colombo,
December 15, 1998.
17 Zhenzou, Matthew Forney. 2002. China’s Labor Pains. Time magazine (Asia
edition). June 17, 2002. Vol. 159, No. 23. pp. 40-47.
18 U.S. Bureau of Census. www.census.gov/mrts/www/mrts.html.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 42
19 North Carolina Employment Security Commission, “Employment and Wages by
Industry,” http://www.ncesc.com/lmi/industry/industryMain.asp
20 U.S. Department of Commerce, Bureau of the Census. 2000 Annual Survey of
Manufacturers, Geographic Area Statistics, M00(AS)-3RV. Washington, DC: U.S.
September 2002.
21 Ibid. U.S. Department of Commerce, Bureau of the Census.
22 Michael E. Porter. 1998. Clusters and the New Economics of Competition. Harvard
Business Review, November-December 1998. pp. 77-90.
23 “North Carolina Furniture Guide,” Greensboro: Carolina Publications, Inc. 2002.
24 Michael E. Porter. 1998. On Competition. The Harvard Business Review book series.
Boston, MA.
25 U.S. Bureau of Economic Analysis. http://www.bea/regional/gsp/action.cfm.
26 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2000A/cstw.htm.
27 U.S. Bureau of Labor Statistics (National Employment, Hours, and Earnings).
http://data.bls.gov/cgi-bin/dsrv.
28 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2001Q3/cstw.htm.
29 North Carolina Employment Security Commission.
http://jobs.esc.state.nc.us/lmi/ew/EW2000A/cstw.htm.
30 U.S. Census/Global Trade Information Services, Inc.
http://www.gtis.com/state/login.cfm.
31 This percentage represents exports as a percentage of value of shipments of NAICS
337110, 337121, 337122, and 337211 (total of $6.1 billion) in 1997. U.S.
Census/Geographic Area Series. http://www.census.gov/prod/www/abs/manu-geo.html
32 Al Schuler and Urs Buehlmann. U.S. furniture and wood product industries project.
Presentation at the Furniture Steering Committee meeting at 3M. November 2001.
33Greg Udelhofen, “Addressing Manufacturing Constraints,” Woodworking
Professionals, Cygnus Business Media, May 2000. http:www.woodworking.com
34 Al Schuler and Urs Buehlmann. Identifying future competitive business strategies for
the U.S. furniture industry: benchmarking and paradigm shift. USDA Forest Service
General Technical Report. In review.
35 Ibid; Urs Buehlmann and Al Schuler, 2002.
36 Ibid; Urs Buehlmann and Al Schuler, 2001.
37 Paul Gardner and Fran Daniel. Furniture Manufacturer to cut jobs, close plant in
Winston-Salem, N.C. area. Winston-Salem Journal, September 20, 2002
38 Bennett Voyles. Ethan Allen goes global. Wood & Wood Products. January 2002.
pp. 47-49.
39 McIntosh, Jay. 2001. Lane closing VA plant – old line factories can't match import
values. Furniture Today. Vol. 25, No. 39, pp. 1 and 32.
40 Carlene Hempel and Steve Cannon. A rough end in Marion – lower labor costs,
overhead lure furniture makers overseas. The News and Observer. December 1, 2001.
pp. 1A and 9A.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 43
41 U.S. Department of Labor, Bureau of Labor Statistics, International Comparisons of
Labor Productivity and Unit Labor Costs in Manufacturing, Report No. 962, April
2002.
43 Al Schuler and Urs Buehlmann. Benchmarking the wood household furniture
industry: A basis for identifying competitive business strategies for today’s global
economy. Presentation at the Wood Component Manufacturers' Association (WCMA)
Annual Meeting. San Antonio, TX. April 2002
44 Al Schuler, Russ Taylor, and Phil Araman. Competitiveness of U.S. wood furniture
manufacturers – lessons learned from the softwood moulding industry. Forest Products
Journal. July/August 2001. pp. 14-20.
45 Urs Buehlmann and Al Schuler. Current Trends and Future Strategies for the U.S.
Furniture Industry in the Face of Stiff Competition. Presentation at the NHLA Annual
Hardwood Symposium, Fall Creek Falls, TN. June 2002.
46 North Carolina Employment Security Commission, “Statewide Employment Data,”
http://jobs.esc.state.nc.us/lmi/ces/emp/selst.htm.
47 Ibid. Paul Gardner and Fran Daniel. 2002.
48 Ibid. U.S. Bureau of Labor Statistics
49 Ibid. U.S. Department of Commerce, Bureau of the Census. 2000
50 Ibid. Michael E. Porter. 1998.
51 William Bamberger and Cathy N. Davidson. Closing: The Life and Death of an
American Factory (the Lyndhurst Series on the South). W. W. Norton & Company.
April 1998.
52 Ibid. Schuler and Buehlmann. 2002.
53 Art Raymond, Wyatt Bassett, Ed Jerger, Jeff Ferguson, and Steve Lawser. How to
compete in today's global economy. Keynote Forum & Expo Education Sessions.
Carolinas Expo, Greensboro, NC. February 14, 2002.
54 Anonymous. It isn't over yet – domestic furniture manufacturers still have cards left
to play. Editorial. Hardwood Review Weekly. June 14, 2002, Vol. 18, Issue 40. pp. 1,
21, and 23.
55 North Carolina Partnership for Economic Development, 1995 Annual Report.
56 Ibid.
57 See The Economist, Survey, “Globalization and Its Critics,” September 29, 2001.
58 Ibid. North Carolina Employment Security Commission,
59 Ibid. North Carolina Employment Security Commission
60 The News & Observer (Raleigh, NC), “The High Price of Free Trade – Leaders
Scramble as Job Losses Mount,” August 21, 2002.
61 Ibid. Schuler and Buehlmann, 2002.
62 Ibid. Buehlmann and Schuler, 2002.
63 The News & Observer (Raleigh, NC), “The High Price of Free Trade – Remedy
Misses the Target,” August 19, 2002.
64 Graham E. Watt, North Carolina Dislocated Worker Study: Problems and Prospects,
North Carolina Department of Commerce, May 2002. See also Chris Estes (North
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 44
Carolina Budget & Tax Center), William Schweke and Sara Lawrence (Corporation for
Enterprise Development), Dislocated Workers in North Carolina: Aiding Their
Transition to Good Jobs, North Carolina Justice and Community Development Center,
June 2002.
65 Robert D. Atkinson, “Creating a National Skills Corporation,” Progressive Policy
Institute, Policy Report, Washington, DC, June 14, 2002.
66 Ibid, Robert D. Atkinson, June 14, 2002.
67 Ibid, Graham Watt, May 2002.
68 Wisconsin Regional Training Partnership (WRTP). 1997 Annual Report.
69 Ibid, WRTP 1997.
70 Ibid, WRTP 1997.
71 Ibid, Chris Estes, William Schweke, and Sara Lawrence, June 2002.
72 Ibid, Chris Estes, William Schweke, and Sara Lawrence, June 2002.
73 Raymond Keating, Small Business Survival Index: Ranking the Policy Environment
for Entrepreneurship Across the Nation, Sixth Annual Report, Washington, DC, July
2001.
74 U.S. Small Business Administration’s website, http://ftp.sbaonline.sba.gov/aboutsba
75 U.S. Small Business Administration’s website, http://ftp.sbaonline.sba.gov/aboutsba
76 Michael J. Mandel, The Internet Depression – the Boom, the Bust, and Beyond
(Chapter 2), New York: Basic Books, 2000.
77 Robert D. Atkinson, “Building New Skills for the New Economy,” Backgrounder,
February 1, 1998.
78 Lester Thurow, Building Wealth – New Rules for Individuals, Companies, and
Nations in a Knowledge-Based Economy, New York: Harper Collins Publishers Inc,
1999, p. 130.
79 Edward J. Feser, North Carolina Regions’ Adjustment to Globalization Trends,
Forum on Globalization and the Restructuring of North Carolina Industry: Problems
and Opportunities, Hickory, North Carolina, May 23, 2002.
80 Robert D. Atkinson, “It’s Not Just Roads and Bridges,” Progressive Policy Institute,
Blueprint Magazine, March 25, 2002.
81 Ibid, Robert D. Atkinson, Blueprint Magazine, March 25, 2002.
82 Jenny Bates and Greg Principato, “A Third Way on Trade and Globalization,”
Progressive Policy Institute, Policy Report, July 18, 2000.
83 Adam Smith. The Wealth of Nations. 1776
84 Yardeni, Edward. Ten Big Themes for 2001 & Beyond. Deutsche Bank Alex Brown.
January 2001.
85 David Ricardo. On The Principles of Political Economy and Taxation. John Murray,
Albemarle-Street, London, UK. 1817
86 Jenny Bates and Greg Principato, “A Third Way on Trade and Globalization,”
Progressive Policy Institute, Washington, DC, Policy Report, June 18, 2000.
87 Ibid, Jenny Bates and Greg Principato, June 18, 2000.
88 Ibid, Jenny Bates and Greg Principato, June 18, 2000.
89 What is the WTO? World Trade Organization’s website, http://www.wto.org.
NC Furniture Industry and Globalization Nwagbara, Buehlmann and Schuler
page 45
Suggested Readings
1. Thomas L. Friedman, The Lexus and the Olive Tree - Understanding Globalization,
New York: Anchor Books, 2000.
2. Joseph Stiglitz, Globalization and Its Discontents, New York: W.W. Norton &
Company, 2002.
3. George Soros, Globalization, New York: Public Affairs, LLC, 2002.
4. Jeffrey Sachs, “Interlocking Economies: Unlocking the Mysteries of Globalization,”
Foreign Policy, Spring 1998.
5. William Bamberger and Cathy N. Davidson. Closing: The Life and Death of an
American Factory (the Lyndhurst Series on the South). W. W. Norton & Company.
April 1998.